Beyond Plausibly Exogenous

16 Pages Posted: 3 Oct 2018

See all articles by Hans van Kippersluis

Hans van Kippersluis

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Cornelius A. Rietveld

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2018

Abstract

We synthesize two recent advances in the literature on instrumental variable (IV) estimation that test and relax the exclusion restriction. Our approach first estimates the direct effect of the IV on the outcome in a subsample for which the IV does not affect the treatment variable. Subsequently, this estimate for the direct effect is used as input for the plausibly exogenous method developed by Conley, Hansen and Rossi. This two‐step procedure provides a novel and informed sensitivity analysis for IV estimation. We illustrate the practical use by estimating the causal effect of (a) attending Catholic high school on schooling outcomes and (b) the number of children on female labour supply.

Keywords: Exclusion restriction, Instrumental variables, Plausibly exogenous

Suggested Citation

van Kippersluis, Hans and Rietveld, Cornelius A., Beyond Plausibly Exogenous (October 2018). The Econometrics Journal, Vol. 21, Issue 3, pp. 316-331, 2018, Available at SSRN: https://ssrn.com/abstract=3259471 or http://dx.doi.org/10.1111/ectj.12113

Hans Van Kippersluis (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

Burg. Oudlaan 50
Rotterdam, NL 3062 PA
Netherlands

Cornelius A. Rietveld

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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