Valid t-ratio Inference for IV

David S. Lee, Justin McCrary, Marcelo Moreira and Jack Porter

Papers from arXiv.org

Abstract: In the single IV model, current practice relies on the first-stage F exceeding some threshold (e.g., 10) as a criterion for trusting t-ratio inferences, even though this yields an anti-conservative test. We show that a true 5 percent test instead requires an F greater than 104.7. Maintaining 10 as a threshold requires replacing the critical value 1.96 with 3.43. We re-examine 57 AER papers and find that corrected inference causes half of the initially presumed statistically significant results to be insignificant. We introduce a more powerful test, the tF procedure, which provides F-dependent adjusted t-ratio critical values.

Date: 2020-10
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

Downloads: (external link)
http://arxiv.org/pdf/2010.05058 Latest version (application/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 (2021)
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:arx:papers:2010.05058

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().