Instrumental Variables in the Long Run

Marc Klemp and Gregory Casey

No 12980, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the interpretation of instrumental variable (IV) regressions that use historical or geographical instruments for contemporary endogenous regressors. We find that conventional IV regressions generally cannot estimate the long-run causal effect of an endogenous explanatory variable when there is a time gap between the instrument and the endogenous variable. We develop a model that can overcome this problem and apply our results to important topics in the field of economic growth, including the effect of institutions on economic growth. We find effects that are smaller than those estimated in the existing literature, demonstrating the quantitative importance of our study.

Keywords: Long-run economic growth; Instrumental variable regression (search for similar items in EconPapers)
JEL-codes: C10 C30 O10 O40 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-evo, nep-gro and nep-knm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cepr.org/publications/DP12980 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Instrumental Variables in the Long Run (2017)
Working Paper: Instrumental Variables in the Long Run (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12980

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP12980

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().