Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/177664 
Year of Publication: 
2017
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 17-096/V
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
We synthesize two recent advances in the literature on instrumental variables (IVs) 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 (2012). 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 (i) attending Catholic high school on schooling outcomes, and (ii) the number of children on female labour supply.
Subjects: 
Instrumental variables
plausibly exogenous
exclusion restriction
JEL: 
C18
C26
J20
Document Type: 
Working Paper

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