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Bounds with Imperfect Instruments: Leveraging the Implicit Assumption of Intransitivity in Correlations

Author

Listed:
  • Wiseman, Nathan

    (University of Nevada, Reno)

  • Sorensen, Todd A.

    (University of California, Merced)

Abstract

Instrumental variables (IV) is an indispensable tool for establishing causal relationships between variables. Recent work has focused on improving bounds for cases when an ideal instrument does not exist. We leverage a principle, "Intransitivity in Correlations," related to an under-utilized property from the statistics literature. From this principle, it is straightforward to obtain new bounds. We argue that these new theoretical bounds become increasingly useful as instruments become increasingly weak or invalid.

Suggested Citation

  • Wiseman, Nathan & Sorensen, Todd A., 2017. "Bounds with Imperfect Instruments: Leveraging the Implicit Assumption of Intransitivity in Correlations," IZA Discussion Papers 10646, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10646
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    References listed on IDEAS

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    1. Langford E. & Schwertman N. & Owens M., 2001. "Is the Property of Being Positively Correlated Transitive?," The American Statistician, American Statistical Association, vol. 55, pages 322-325, November.
    2. Aviv Nevo & Adam M. Rosen, 2012. "Identification With Imperfect Instruments," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 659-671, August.
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    JEL classification:

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

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