A cautionary tale about control variables in IV estimation

Eva Deuchert () and Martin Huber

No 1439, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: Many instrumental variable (IV) regressions include control variables to justify (conditional) independence of the instrument and the potential outcomes. The plausibility of conditional IV independence crucially depends on the timing when the control variables are determined. This paper systemically works through different IV models and discusses the (conditions for the) satisfaction of conditional IV independence when controlling for covariates measured (a) prior to the instrument, (b) after the treatment, or (c) both. To illustrate these identification issues, we consider an empirical application using the Vietnam War draft risk as instrument either for veteran status or education to estimate the effects of these variables on labor market and health outcomes.

Keywords: Instrument; control variables; conditional independence; covariates (search for similar items in EconPapers)
JEL-codes: C26 J24 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-12
New Economics Papers: this item is included in nep-ecm, nep-lab and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1439.pdf (application/pdf)

Related works:
Journal Article: A Cautionary Tale About Control Variables in IV Estimation (2017)
Working Paper: A cautionary tale about control variables in IV estimation (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2014:39

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