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University of PennsylvaniaScholarlyCommons Statistics Papers Wharton Faculty Research9102014Using an Instrumental Variable to Test for Unmeasured Confounding Jing Cheng Scott A. Porch University of
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How to fill out using an instrumental variable
01
To fill out using an instrumental variable, follow these steps:
02
Identify the endogenous variable, which is the variable affected by both the instrument and the treatment variable.
03
Choose a valid instrumental variable that is correlated with the endogenous variable but not directly related to the treatment variable.
04
Conduct a regression analysis to estimate the effect of the instrumental variable on the endogenous variable.
05
Use the estimated effect of the instrumental variable to estimate the causal effect of the treatment variable on the endogenous variable.
06
Assess the validity of the instrumental variable through statistical tests and sensitivity analysis.
07
Interpret the results and draw conclusions about the causal relationship between the treatment variable and the endogenous variable.
Who needs using an instrumental variable?
01
Using an instrumental variable is beneficial for researchers and analysts who want to estimate causal effects in situations where randomized controlled trials are not feasible or ethical.
02
It is particularly useful in economics and social sciences where conducting experiments may be difficult or impossible.
03
Instrumental variable analysis allows for the estimation of causal effects by exploiting natural or quasi-experimental variations in the instrumental variable and the endogenous variable.
04
Researchers who need to overcome endogeneity bias and establish causal relationships can benefit from using instrumental variable techniques.
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