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Relaxing Instrument Exogeneity with Common Confounders

Christian Tien

arXiv 5 Jan 2023 · Econometrics

arXiv:2301.02052 · PDF · DOI · OpenAlex · Extracted main text

Abstract

Instruments can be used to identify causal effects in the presence of unobserved confounding, under the famous relevance and exogeneity (unconfoundedness and exclusion) assumptions. As exogeneity is difficult to justify and to some degree untestable, it often invites criticism in applications. Hoping to alleviate this problem, we propose a novel identification approach, which relaxes traditional IV exogeneity to exogeneity conditional on some unobserved common confounders. We assume there exist some relevant proxies for the unobserved common confounders. Unlike typical proxies, our proxies can have a direct effect on the endogenous regressor and the outcome. We provide point identification results with a linearly separable outcome model in the disturbance, and alternatively with strict monotonicity in the first stage. General doubly robust and Neyman orthogonal moments are derived consecutively to enable the straightforward root-n estimation of low-dimensional parameters despite the high-dimensionality of nuisances, themselves non-uniquely defined by Fredholm integral equations. Using this novel method with NLS97 data, we separate ability bias from general selection bias in the economic returns to education problem.

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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
1Guido W Imbens and Whitney K Newey (2009) Identification and estimation of triangular simultaneous equations models without additivity0.92843100%
2Laura Liu, Alexandre Poirier, and Ji-Liang Shiu (2021) Identification and estimation of average partial effects in semiparametric binary response panel models0.81142100%
3Xavier D'Haultfuille, Stefan Hoderlein, and Yuya Sasaki (2021) Testing and relaxing the exclusion restriction in the control function approach0.73732100%
4Andrew Bennett, Nathan Kallus, Xiaojie Mao, Whitney Newey, Vasilis S… (2022) Inference on strongly identified functionals of weakly identified functions0.64441100%
5Richard W Blundell and James L Powell (2004) Endogeneity in semiparametric binary response models0.64422100%
6Yifan Cui, Hongming Pu, Xu Shi, Wang Miao, and Eric Tchetgen Tchetgen (2020) Semiparametric proximal causal inference0.64422100%
7Roger Klein and Francis Vella (2010) Estimating a class of triangular simultaneous equations models without exclusion restrictions0.64422100%
8Arthur Lewbel (2012) Using heteroscedasticity to identify and estimate mismeasured and endogenous regressor models0.64422100%
9Daniel L Millimet and Rusty Tchernis (2013) Estimation of treatment effects without an exclusion restriction: With an application to the analysis of the school breakfast pr…0.64422100%
10Whitney K Newey, James L Powell, and Francis Vella (1999) Nonparametric estimation of triangular simultaneous equations models0.64422100%

Showing the top 10 of 25 scored citations.