Historical instruments and contemporary endogenous regressors

Gregory Casey and Marc Klemp

Journal of Development Economics, 2021, vol. 149, issue C

Abstract: We provide a simple framework for interpreting instrumental variable regressions when there is a gap in time between the impact of the instrument and the measurement of the endogenous variable, highlighting a particular violation of the exclusion restriction that can arise in this setting. In the presence of this violation, conventional IV regressions do not consistently estimate a structural parameter of interest. Building on our framework, we develop a simple empirical method to estimate the long-run effect of the endogenous variable. We use our bias correction method to examine the role of institutions in economic development, following Acemoglu et al. (2001). We find long-run coefficients that are smaller than the coefficients from the original work, demonstrating the quantitative importance of our framework.

Keywords: Long-run economic development; Instrumental variable regression (search for similar items in EconPapers)
JEL-codes: C10 C30 O10 O40 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304387820301619
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Historical Instruments and Contemporary Endogenous Regressors (2021)
Working Paper: Historical Instruments and Contemporary Endogenous Regressors (2020)
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:eee:deveco:v:149:y:2021:i:c:s0304387820301619

DOI: 10.1016/j.jdeveco.2020.102586

Access Statistics for this article

Journal of Development Economics is currently edited by M. R. Rosenzweig

More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().