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Using instrumental variables to establish causality

Author

Listed:
  • Grigory Aleksin

    (Royal Holloway, University of London)

  • Sascha O. Becker

    (University of Warwick, UK)

Abstract

Randomized control trials are often considered the gold standard to establish causality. However, in many policy-relevant situations, these trials are not possible. Instrumental variables affect the outcome only via a specific treatment; as such, they allow for the estimation of a causal effect. However, finding valid instruments is difficult. Moreover, instrumental variables (IV) estimates recover a causal effect only for a specific part of the population. While those limitations are important, the objective of establishing causality remains; and instrumental variables are an important econometric tool to achieve this objective.

Suggested Citation

  • Grigory Aleksin & Sascha O. Becker, . "Using instrumental variables to establish causality," World of Labour, LISER, pages 250.2-250.2, September.
    • Handle: RePEc:iza:izawol:journl:2024:n:250.v2
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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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