X. Instrumental Variables

Whenever an explanatory variable is endogenous, i.e., the COR(x,residuals) !=0, we have to rely on Instrumental Variable approach. The following resources are offered on this topic:

• 1. A layperson explanation of IV models from The Economist magazine, download.

  2. How to conduct IV analysis in Stata, download.

  3. Lecture notes from Jeffery Wooldridge, download.

  4. Hausman test for endogeneity, download.