[Journal:] IZA World of Labor [ISSN:] 2054-9571 [Year:] 2016 [Issue:] 250
Randomized control trials are often considered the gold standard to establish causality. However, in many policy-relevant situations, these trials are not possible. Instrumental variables affect the outcome only via a specific treatment; as such, they allow for the estimation of a causal effect. However, finding valid instruments is difficult. Moreover, instrumental variables estimates recover a causal effect only for a specific part of the population. While those limitations are important, the objective of establishing causality remains; and instrumental variables are an important econometric tool to achieve this objective.
natural experiments quasi-natural experiments treatment effects local average treatment effect omitted variable bias reverse causality