Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161270
Authors: 
Pei, Zhuan
Pischke, Jörn-Steffen
Schwandt, Hannes
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers 10647
Abstract: 
Researchers frequently test identifying assumptions in regression based research designs (which include instrumental variables or difference-in-differences models) by adding additional control variables on the right hand side of the regression. If such additions do not affect the coefficient of interest (much) a study is presumed to be reliable. We caution that such invariance may result from the fact that the observed variables used in such robustness checks are often poor measures of the potential underlying confounders. In this case, a more powerful test of the identifying assumption is to put the variable on the left hand side of the candidate regression. We provide derivations for the estimators and test statistics involved, as well as power calculations, which can help applied researchers interpret their findings. We illustrate these results in the context of various strategies which have been suggested to identify the returns to schooling.
Subjects: 
balancing
variable addition
robustness checks
specification testing
Hausman test
JEL: 
C31
C52
Document Type: 
Working Paper

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