Rain, Rain, Go away: 137 potential exclusion-restriction violations for studies using weather as an instrumental variable

63 Pages Posted:

Date Written: October 20, 2020

Abstract

Instrumental variable (IV) analysis assumes that the instrument only affects the dependent variable via its relationship with the independent variable. Other possible causal routes from the IV to the dependent variable are exclusion-restriction violations and make the instrument invalid. Weather has been widely used as an instrumental variable in social science to predict many different variables. The use of weather to instrument different independent variables represents strong prima facie evidence of exclusion violations for all studies using weather as an IV. A review of 185 social science studies (including 111 IV studies) reveals 137 variables which have been linked to weather, all of which represent potential exclusion violations. I conclude with practical steps for systematically reviewing existing literature to identify possible exclusion violations when using IV designs.

Keywords: instrumental variable, IV regression, weather, rain, exclusion restriction

JEL Classification: C360

Suggested Citation

Mellon, Jonathan, Rain, Rain, Go away: 137 potential exclusion-restriction violations for studies using weather as an instrumental variable (October 20, 2020). Available at SSRN: https://ssrn.com/abstract=

Jonathan Mellon (Contact Author)

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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