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Resurgence of Instrument Variable Estimation and Fallacy of Endogeneity
"... This paper provides a critical rational reconstructionof the evolution of attitudes to the use of the instrumental variable, IV, estimator in di¤erent parts of econometrics. The author, like many statisticians, is sceptical about the usefulness of the technique and in particular about the resurgenc ..."
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This paper provides a critical rational reconstructionof the evolution of attitudes to the use of the instrumental variable, IV, estimator in di¤erent parts of econometrics. The author, like many statisticians, is sceptical about the usefulness of the technique and in particular about the resurgence of its use in microeconometrics. Both the critique and the detailed, nicely documented, history of the way that interest in instrumental variables has waxed and waned are very interesting. While the paper is polemical and is likely to be controversial, it raises some relevant questions and should engender some debate, hopefully prompting some interesting responses. I think the paper might be more e¤ective were it less polemical, but I think that with some revision the paper is worth publishing. Below I discuss some of the issues and make a few suggestions. 2
On Searching for Generalized Instrumental Variables
"... Abstract Instrumental Variables are a popular way to identify the direct causal effect of a random variable X on a variable Y . Often no single instrumental variable exists, although it is still possible to find a set of generalized instrumental variables (GIVs) and identify the causal effect of al ..."
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Abstract Instrumental Variables are a popular way to identify the direct causal effect of a random variable X on a variable Y . Often no single instrumental variable exists, although it is still possible to find a set of generalized instrumental variables (GIVs) and identify the causal effect of all these variables at once. Till now it was not known how to find GIVs systematically or even test efficiently, if given variables satisfy GIV conditions. We provide fast algorithms for searching and testing restricted cases of GIVs. However, we prove that in the most general case it is NPhard to verify if given variables fulfill the conditions of a general instrumental sets