Arbeitspapier
Let the Data Speak? On the Importance of Theory-Based Instrumental Variable Estimations
In absence of randomized controlled experiments, identification is often aimed via instrumental variable (IV) strategies, typically two-stage least squares estimations. According to Bayes' rule, however, under a low ex ante probability that a hypothesis is true (e.g. that an excluded instrument is partially correlated with an endogenous regressor), the interpretation of the estimation results may be fundamentally flawed. This paper argues that rigorous theoretical reasoning is key to design credible identification strategies, aforemost finding candidates for valid instruments. We discuss prominent IV analyses from the macro-development literature to illustrate the potential benefit of structurally derived IV approaches.
- Sprache
-
Englisch
- Erschienen in
-
Series: IZA Discussion Papers ; No. 12080
- Klassifikation
-
Wirtschaft
Econometric and Statistical Methods and Methodology: General
Multiple or Simultaneous Equation Models: Instrumental Variables (IV) Estimation
Macroeconomic Analyses of Economic Development
- Thema
-
Bayes' Rule
economic development
identification
instrumental variable estimation
macroeconomic theory
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Grossmann, Volker
Osikominu, Aderonke
- Ereignis
-
Veröffentlichung
- (wer)
-
Institute of Labor Economics (IZA)
- (wo)
-
Bonn
- (wann)
-
2019
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Grossmann, Volker
- Osikominu, Aderonke
- Institute of Labor Economics (IZA)
Entstanden
- 2019
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