Abstract

http://ssrn.com/abstract=987057
 
 

References (33)



 
 

Citations (24)



 


 



Plausibly Exogenous


Timothy G. Conley


University of Chicago - Booth School of Business

Christian Hansen


University of Chicago Graduate School of Business

Peter E. Rossi


University of California, Los Angeles (UCLA) - Anderson School of Management

July 31, 2008


Abstract:     
Instrumental variables (IVs) are widely used to identify effects in models with potentially endogenous explanatory variables. In many cases, the instrument exclusion restriction that underlies the validity of the usual IV inference holds only approximately; that is, the instruments are 'plausibly exogenous.' We introduce a method of relaxing the exclusion restriction and performing sensitivity analysis with respect to the degree of violation. This provides a practical tool for applied researchers who want to proceed with less than perfect instruments. We illustrate our approaches with empirical examples that examine the effect of 401(k) participation upon asset accumulation, demand for margarine, and returns-to-schooling.

Number of Pages in PDF File: 48

Keywords: Instrumental Variables, Sensitivity Analysis, Priors

JEL Classification: C3, C11

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Date posted: May 18, 2007 ; Last revised: August 4, 2008

Suggested Citation

Conley, Timothy G. and Hansen, Christian and Rossi , Peter E., Plausibly Exogenous (July 31, 2008). Available at SSRN: http://ssrn.com/abstract=987057 or http://dx.doi.org/10.2139/ssrn.987057

Contact Information

Timothy G. Conley
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7281 (Phone)
Christian Hansen
University of Chicago Graduate School of Business ( email )
Chicago, IL 60637
United States
773-834-1702 (Phone)
Peter E. Rossi (Contact Author)
University of California, Los Angeles (UCLA) - Anderson School of Management ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
773-294-8616 (Phone)
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