Valid t-ratio Inference for IV

David Lee, Justin McCrary, Marcelo Moreira and Jack Porter
Additional contact information
David Lee: Princeton University
Justin McCrary: Columbia University
Jack Porter: University of Wisconsin-Madison

Working Papers from Princeton University. Economics Department.

Abstract: In the single-IV model, researchers commonly rely on t-ratio-based inference, even though the literature has quantified its potentially severe large-sample distortions. Building on the approach for correcting inference of Stock and Yogo (2005), we introduce the tF critical value function, leading to a minimized standard error adjustment factor that is a smooth function of the first-stage F-statistic. Applying the correction to a sample of 61 AER papers leads to a 25 percent increase in standard errors, on average. tF confidence intervals have shorter expected length than those of Anderson and Rubin (1949), whenever both are bounded intervals.

Keywords: Econometrics; Instrumental Variables (search for similar items in EconPapers)
JEL-codes: C01 C1 C26 C36 (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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https://www.princeton.edu/~davidlee/wp/w29124.pdf

Related works:
Journal Article: Valid t-Ratio Inference for IV (2022)
Working Paper: Valid t-ratio Inference for IV (2021)
Working Paper: Valid t-ratio Inference for IV (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2021-69

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