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acautionarytaleaboutcontrolvariablesinivestimation_oxfbulleconstat
Journal article

A Cautionary Tale About Control Variables in IV Estimation

BP2-STS

  • Deuchert, Eva Department of Economics; University of Fribourg; Bd. de Pérolles 90 1700 Fribourg, Switzerland
  • Huber, Martin ORCID Department of Economics; University of Fribourg; Bd. de Pérolles 90 1700 Fribourg, Switzerland
  • 2017
Published in:
  • Oxford Bulletin of Economics and Statistics. - Wiley. - 2017, vol. 79, no. 3, p. 411-425
Statistics
Probability and Uncertainty
Economics and Econometrics
Social Sciences (miscellaneous)
Statistics and Probability
English 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 paperworks through different IV models and discusses the (conditions for the) satisfaction of conditional IV independence depending on whether the control variables are measured prior to or after instrument assignment. To illustrate the identification issues, we consider the Vietnam War draft risk as instrument either for veteran status or education to evaluate the effects of these variables on labour market and health outcomes. Our empirical analysis based on the ‘Young Men in High School and Beyond’ survey suggests that commonly used conditional IV strategies to estimate the impact of draft induced military service or education may be severely biased due to the use of improper controls.
Faculty
Faculté des sciences économiques et sociales et du management
Department
Département d'économie politique
Language
  • English
Classification
Economics
License
Rights reserved
Open access status
green
Identifiers
Persistent URL
https://folia.unifr.ch/unifr/documents/325218
Statistics
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