Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229534
Authors: 
Casey, Gregory P.
Klemp, Marc P. B.
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8716
Abstract: 
We provide a simple framework for interpreting instrumental variable regressions when there is a gap in time between the impact of the instrument and the measurement of the endogenous variable, highlighting a particular violation of the exclusion restriction that can arise in this setting. In the presence of this violation, conventional IV regressions do not consistently estimate a structural parameter of interest. Building on our framework, we develop a simple empirical method to estimate the long-run effect of the endogenous variable. We use our bias correction method to examine the role of institutions in economic development, following Acemoglu et al. (2001). We find long-run coefficients that are smaller than the coefficients from the existing literature, demonstrating the quantitative importance of our framework.
Subjects: 
long-run economic development
instrumental variable regression
JEL: 
C10
C30
O10
O40
Document Type: 
Working Paper

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