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Science: A Readers'
in Political
Estimation
Instrumental Variables
Guide
Yale University
Yale University
Allison J. Sovey
Donald P. Green
The use of instrumentalvariables regressioninpolitical science has evolvedfrom an obscure technique to a staple of the
uneven
political science toolkit.Yet thesurgeof interestin the instrumentalvariablesmethod has led to implementationof
we
on
in
chart
the
ways which
quality.Afterproviding a briefoverviewof themethod and theassumptions which it rests,
more
than 100 articlespublished in theAmerican
theseassumptionsare invokedinpractice inpolitical science.We review
JournalofPolitical Science, theAmerican Political ScienceReview, and World Politics over a 24-year span.We discuss in
detail twonoteworthyapplications of instrumentalvariables regression,callingattention to thestatisticalassumptions that
each invokes.The concludingsectionproposes reportingstandards and provides a checklist
for readers to consideras they
evaluate applications of thismethod.
Political
by error or unobserved
Instrumental variables
factors
regres
sion is designed to relax some of the rigid assumptions
of OLS regression, but IV introduces assumptions of its
own. Whether IV is in fact an improvement over OLS de
pends on the tenability of those assumptions in specific
applications (Bartels 1991).
In order to help readers judge the tenability of IV as
sumptions, researchers must provide pertinent evidence
and argumentation. Readers must have access to certain
J. Sovey
is a Ph.D.
student
in Political
Science,
Yale University,
merous
Street, Rosenkranz
Hall,
Room
437, New
Haven,
CT
Rosenkranz
Hall,
Room
437, New
Haven,
CT
06520
(donald.green@yale.edu).
We
are
helpful
This projectwas fundedby supportfromYale's InstitutionforSocial and Policy Studies.We are responsibleforany errors.
American Journal ofPolitical Science,Vol. 55,No. 1, January2011, Pp. 188-200
?2010, Midwest Political Science
Association
DOI:
10.1111/j.l540-5907.2010.00477.x
188
IV:A READERS'GUIDE
189
7o + 7i Zi +
8, Qu + 02Q2, +
+8* QKi +
e{
(2)
(Morgan and
and Hill
p0 + PiXf-+ Xi Qh + k2Qn +
+\KQKi
Uf
(1)
concern.
Two-way causation is not the only
The instrumental variables estimator ispremised on a
two-equation model
regressor
^he
is
One concern, however,
of the disturbance.
is independent
inwhich case including them
that covariates may not be exogenous,
may bias the IV estimates.
able
instru
could be used as excluded
In principle,
several variables
case two-stage
least squares provides
in which
mental
variables,
variables
more
than instrumental
efficient estimates
regression,
and the availability of excess instruments allows the researcher to
which
mate
variables
are
scarce,
and
so we
focus
one excluded
variable
instrumental
just
the effect of an endogenous
regressor.
on
enables
the case
in
us to esti
ipo
variable X;. In the case of the fluvaccine study,one could
were it the case that
imagine a violation of this condition
encouragement to get a vaccine, rather than the vaccine
itself,affected health outcomes. In the case of votermobi
lization experiments, this assumption would be violated,
ment
television
unmeasured
doubtful.
Even well-reasoned
it isdifficult to quan
ALLISONJ.SOVEYANDDONALD R GREEN
ment
is valid because
in an OLS
and Xx
variable
when
5
Xj
is endogenous.
and Watson
suggest using limited information
to Monte
Carlo
simula
likelihood, which,
according
is less prone to bias and has more
reliable standard errors.
maximum
3
Violations
tions,
Another
of this assumption
may
to sample
attri
below.
IV: A READERS'
GUIDE
191
(Rubin
Pischke
1978). We
1,we
^
+
TT5
-.
1T6-r tt7+ ^8
(3)
ALLISON
jp2
J. SOVEYAND
P. GREEN
DONALD
Watches
Supports
Fox News
Fox News
Prop. 209
IfWatches
Special If
Supports
Prop. 209 If
Does Not
Share
Group
Special If
Assigned to
Treatment?
Assigned
to Control?
Debate?
No.
too)
Population
Never-takers
No
No
No
No
IT l
Never-takers
No
No
Yes
No
Never-takers
No
No
No
Yes
Never-takers
No
No
Yes
Yes
Compliers
Yes
No
No
No
Compilers
Yes
No
Yes
No
Compliers
Yes
No
No
Yes
Compliers
Yes
No
Yes
Yes
Type
(yn)
Always-takers
Yes
Yes
No
No
10
Always-takers
Yes
Yes
Yes
No
11
Always-takers
Yes
Yes
No
Yes
12
Always-takers
Yes
Yes
Yes
Yes
13
Defiers
No
Yes
No
No
14
Defiers
No
Yes
Yes
No
15
Defiers
No
Yes
No
Yes
Yes
Yes
16
No
Defiers
Yes
of the
Watch Debate?
^ab
ab
TT5
<
TTab
^8
^ab
^10
ab
7T 12
^13
-b
7T
ab
7Ti3
(i.e.,
tth
it 15=
tt\6
0).
This
stipula
6
Estimationof theCACE or LATE becomesmore complicatedwhen
one
controls
similar when
or covariates,
IV is applied
of local average
response
functions,
see Abadie
(2003).
PlimNc^oo ^
77i0+
77i2
(4)
bilityto
PlimNt^oc
773+
774+
776+
778+
77io+ ^12
(5)
(775+
=
776+
777+
(779+
77io+
775+
776+
778+
77n+
779+
77io+
77ii+
77i2)
77i2)
777+
(6)
Combining
equations
VtV -Vc
775+
776+
777
777+
778
IV:A READERS'GUIDE
193
ment
heterogeneous treatment
effects are admitted as a possibility, caution must be ex
ferently.
The next category, "Natural Experiment," includes
instruments thatwere not formed using random assign
assignment.
searches were
strument,"
but
and "in
tried, such as "IV," "endogenous,"
results to be
far too many unrelated
these yielded
useful.
8An example of a government-run
our
after we completed
appeared
one that
although
experiment,
content analysis,
is Bhavnani's
dates
in India.
194
Table 2
ALLISONJ.SOVEYANDDONALD P. GREEN
Type of Justification
1991-1996
0%
0
7
7
0
0
86
0%
Experiment
Natural Experiment
Theory
9
9
Lag
Reference
Empirics
9
68
None
100%
22
8
23
Total Percent
Number ofArticles
% Just-identified
% Report First Stage
2003-2008
1997-2002
6%
3
31
11
5
5
39
100%
36
22
33
4%
0
14
14
3
17
48
Too%
29
24
31
100%
15
13
7
Table 2 summarizesmore than 100 articlespublished in theAmericanPolitical ScienceReview, theAmerican JournalofPolitical Science,
and World
over a 24-year
Politics
span, categorizing
them according
to the way
Percentages
of Categories:
a random
IVs that were generated
process.
Experiment:
assignment
through
a
IVs that were generated
Natural Experiment:
process.
quasi-random
through
assignment
a theoretical
inwhich the authors provided
for the validity of their exclusion
Theory: Articles
explanation
within
Explanation
Empirics:
selected
based
on
on Z to determine
the strongest instruments).
regressing X
inwhich the author explains the validity
Reference: Articles
None: No justification
provided.
during theMaoist
precommunist
9A
laggedvariable isa realizationof a variable at a previouspoint in
time.For example, laggedcampaign spending is theamount spent
by
a candidate
in a previous
election.
test (such
as
regressing
restrictions
Y on X
restrictions.
and Z
by citing another
to show no
correlation
or
author's work.
Our
which
data.
trends. First, it
is clear that the percentage of articles that provide some
justification for the choice of instruments increased sub
identification
(2009) on alternative
strategies. Some
instrument and ask what param
start with a near-random
weak
instruments.
the
Albertson and Lawrence appropriately model
relationship between media exposure and support for
Proposition 209 in a manner that does not presuppose
that exposure is exogenous. Their two-equation system is
(8)
Xi =y0 + 1iZi + ei
(9)
10See Gelman
authors
with a parametertheyhope
etersitmight help identify;
othersstart
to identify and
instrument.
11
The
authors
also
include
an array of covariates,
but we
exclude
196
show a substantively strong but statistically insignificant
relationship between program viewing and support for
the proposition. Viewers were 8.1 percentage points more
likely to support the ballot measure, with a standard error
com
pleted both the pretest and the posttest, and the ques
tion iswhether attrition introduced noticeable imbalance
among pretreatment covariates. A regression of treatment
assignment on the demographic variables used in their
study does not yield any significant predictors of treat
ment assignment. (The demographic variables in our
regression include Party Identification, Interest in Poli
tics,Watch National News, Read Newspapers, Education,
Income, Gender, White, and dummy variables formiss
of com
Application
2: IV Regression
Experiment
and a Natural
fractionalization, mountainous
terrain, and population.
fixed
effects
and
Country
country-specific time trends are
also included inmost
12In
other analyses,theauthors findthatviewing theprogramdid
evidence
turnout
or attitude
that viewers
feltmore
polarization,
informed
there is
although
about the issue.
in
holds up when
IV:A READERS'GUIDE
197
instruments prob
ment
or event satis
periment, "it is assumed that some variable
or variable is
event
the
the
criterion
fies
of'randomness,'
factors
orthogonal to the unobservable and unmalleable
that could affect the outcomes under study" (Rosenzweig
and Wolpin 2000, 827). In this case, the exogeneity of
When
to the assumption
special critical attention must be paid
that the instrument is unrelated to the disturbance term.
A Reader's Checklist
Having reviewed the assumptions underlying instrumen
tal variables regression, both in general and with regard to
we conclude with a checklist (sum
specific applications,
marized inTable 3) for readers to consider as they evaluate
argumentation and evidence.
1)What is the estimand? A basic conceptual question
iswhether treatment effects are homogenous. In
strumental variables regression identifies the local
13
of thesestatisticalrelationshipsvariesdepending
The significance
on model
specification.
of the analysis.
materials
for details
re
drawing inferences from IV
sults, the reader should consider the question of
whether results for theCompliers in thisparticular
a whole. When
do rainfall
study are generalizable. For example,
induced shocks to economic growth have the same
effect on ethnic violence as technology-induced
14
Even
if there were
no
spillover
effects, countries
The
to
graphicallyproximal are likely shareweather assignments.
fact that rainfallis randomly "assigned" to geographic locations
has potentiallyimportantconsequences fortheestimatedstandard
ig8
Table 3
What
Model
Issues toAddress
Category
is the estimand?
homogenous or heterogeneous?
Explain why it isplausible to believe that
variable.
covariates.
predetermined
Exclusion Restriction
Instrument Strength
treatment
on
the outcome.
Value Assumption
(SUTVA)
groups.
control
Monotonicity
and
generates
similar
estimates.
units.
ment,
more
is weakly pre
dicted by other covariates. If attrition occurs, the
researcher should assess whether the loss of treat
ment
undermines
the
which
IV:A READERS'GUIDE
199
equation
Although the precise criteria by which to evalu
ate the weakness of an instrument are subject to
debate, the usual rule of thumb is that a single
instrumental variable should have an F-statistic of
(2007).
observations.
arising from
References
Abadie,
2003.
Alberto.
Instrumental
"Semiparametric
Daron,
Acemoglu,
Johnson,
and
James A.
Vari
Journal
Robinson.
Guido
Joshua D.,
Angrist,
and Donald
Imbens,
B. Rubin.
An Empiricist's
Press.
Econometrics:
Prince
Companion.
University
E.
Barnard,
J.,C.
Bartels,
Larry M.
Frangakis,
J. L. Hill,
and D.
B. Rubin.
2003.
"Instrumental
and
'Quasi
Instrumen
777-800.
200
ALLISON
J. SOVEYAND
DONALD
P. GREEN
Press.
Chernozhukov,
Victor,
and Christian
Hansen.
2008.
"The
Re
Economics
Letters
100(1):
68-71.
Turnout:
Evidence
from a Natural
American
Experiment."
Alan,
and Donald
Green.
2000.
Donald
Press,
251-73.
2008.
"Analysis
of Cluster
Hirano,
Hua
2005.
"Robust,
Instrument:
Ac
Quar
72.
725-53.
Experiments'
in Economics."
Literature38(4): 827-74.
of Economic
Journal
Stock,
James H.,
and Mark
W. Watson.
2007.
Introduction
to
Public
Goods
Provision
in Rural
China."
American
OH:
South-Western
College.