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Profiled Anderson--Rubin Test: Robust Inference Allowing for Direct Effects of Instruments

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  • Jung Hyub Lee

Abstract

Instrumental variable analyses often rely on the assumption that instruments affect the outcome only through the endogenous regressor. In many applications, researchers can defend only a plausible range for direct effects of instruments, while conventional sensitivity analyses may be unreliable when instruments are weak. This paper proposes the profiled Anderson--Rubin (pAR) test, which considers all direct effects within a prespecified range and retains a candidate effect whenever at least one admissible direct effect is consistent with the data. Under the maintained sampling assumptions, the procedure controls false rejection for each compatible candidate without requiring strong instruments. The paper provides practical methods for constructing confidence sets and distinguishes substantive bounds from bounds tied to the realized instrument design. Simulations and applications to retirement saving and returns to schooling show that the procedure resembles conventional sensitivity analysis when instruments are strong but preserves substantially more uncertainty when identification is weak.

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  • Jung Hyub Lee, 2026. "Profiled Anderson--Rubin Test: Robust Inference Allowing for Direct Effects of Instruments," Papers 2609.18150, arXiv.org.
  • Handle: RePEc:arx:papers:2609.18150
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    References listed on IDEAS

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