IDEAS home Printed from https://ideas.repec.org/p/usg/econwp/201439.html
   My bibliography  Save this paper

A cautionary tale about control variables in IV estimation

Author

Listed:
  • Deuchert, Eva
  • Huber, Martin

Abstract

Many instrumental variable (IV) regressions include control variables to justify (conditional) independence of the instrument and the potential outcomes. The plausibility of conditional IV independence crucially depends on the timing when the control variables are determined. This paper systemically works through different IV models and discusses the (conditions for the) satisfaction of conditional IV independence when controlling for covariates measured (a) prior to the instrument, (b) after the treatment, or (c) both. To illustrate these identification issues, we consider an empirical application using the Vietnam War draft risk as instrument either for veteran status or education to estimate the effects of these variables on labor market and health outcomes.

Suggested Citation

  • Deuchert, Eva & Huber, Martin, 2014. "A cautionary tale about control variables in IV estimation," Economics Working Paper Series 1439, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2014:39
    as

    Download full text from publisher

    File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1439.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jason M. Lindo & Charles Stoecker, 2014. "Drawn Into Violence: Evidence On “What Makes A Criminal” From The Vietnam Draft Lotteries," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 239-258, January.
    2. Joshua D. Angrist & Alan B. Krueger, 1991. "Estimating the Payoff to Schooling Using the Vietnam-era Draft Lottery," Working Papers 670, Princeton University, Department of Economics, Industrial Relations Section..
    3. Carlos Dobkin & Reza Shabani, 2009. "The Health Effects Of Military Service: Evidence From The Vietnam Draft," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 69-80, January.
    4. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
    5. Böhm, Sebastian & Grossmann, Volker & Steger, Thomas M., 2014. "Does Public Education Expansion Lead to Trickle-Down Growth?," FSES Working Papers 452, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    6. Angrist, Joshua D. & Chen, Stacey H. & Frandsen, Brigham R., 2010. "Did Vietnam veterans get sicker in the 1990s? The complicated effects of military service on self-reported health," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 824-837, December.
    7. Ravasi, Claudio & Salamin, Xavier & Davoine, Eric, 2013. "The challenge of dual career expatriate management in a specific host national environment: An exploratory study of expatriate and spouse adjustment in Switzerland based MNCs," FSES Working Papers 447, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    8. Guido W. Imbens & Whitney K. Newey, 2009. "Identification and Estimation of Triangular Simultaneous Equations Models Without Additivity," Econometrica, Econometric Society, vol. 77(5), pages 1481-1512, September.
    9. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects, and Econometric Policy Evaluation," Econometrica, Econometric Society, vol. 73(3), pages 669-738, May.
    10. Martin Huber, 2014. "Identifying Causal Mechanisms (Primarily) Based On Inverse Probability Weighting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(6), pages 920-943, September.
    11. Victor R. Fuchs, 1982. "Economic Aspects of Health," NBER Books, National Bureau of Economic Research, Inc, number fuch82-1.
    12. Kasey S. Buckles & Daniel M. Hungerman, 2013. "Season of Birth and Later Outcomes: Old Questions, New Answers," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 711-724, July.
    13. Kelly Bedard & Olivier Deschênes, 2006. "The Long-Term Impact of Military Service on Health: Evidence from World War II and Korean War Veterans," American Economic Review, American Economic Association, vol. 96(1), pages 176-194, March.
    14. Grimard, Franque & Parent, Daniel, 2007. "Education and smoking: Were Vietnam war draft avoiders also more likely to avoid smoking?," Journal of Health Economics, Elsevier, vol. 26(5), pages 896-926, September.
    15. Dalton Conley & Jennifer Heerwig, 2012. "The Long-Term Effects of Military Conscription on Mortality: Estimates From the Vietnam-Era Draft Lottery," Demography, Springer;Population Association of America (PAA), vol. 49(3), pages 841-855, August.
    16. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records," American Economic Review, American Economic Association, vol. 80(3), pages 313-336, June.
    17. Kasy, Maximilian, "undated". "Instrumental variables with unrestricted heterogeneity and continuous treatment - DON'T CITE! SEE ERRATUM BELOW," Working Paper 33257, Harvard University OpenScholar.
    18. Karim Chalak & Halbert White, 2011. "Viewpoint: An extended class of instrumental variables for the estimation of causal effects," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(1), pages 1-51, February.
    19. Dalton Conley & Jennifer Heerwig, 2011. "The War at Home: Effects of Vietnam-Era Military Service on Post-War Household Stability," NBER Working Papers 16671, National Bureau of Economic Research, Inc.
    20. Thomas Lemieux & David Card, 2001. "Going to College to Avoid the Draft: The Unintended Legacy of the Vietnam War," American Economic Review, American Economic Association, vol. 91(2), pages 97-102, May.
    21. Dalton Conley & Jennifer Heerwig, 2011. "The War at Home: Effects of Vietnam-Era Military Service on Postwar Household Stability," American Economic Review, American Economic Association, vol. 101(3), pages 350-354, May.
    22. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    23. Eva Deuchert & Martin Huber, 2017. "A Cautionary Tale About Control Variables in IV Estimation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(3), pages 411-425, June.
    24. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    25. Abadie, Alberto, 2003. "Semiparametric instrumental variable estimation of treatment response models," Journal of Econometrics, Elsevier, vol. 113(2), pages 231-263, April.
    26. Victor R. Fuchs, 1982. "Time Preference and Health: An Exploratory Study," NBER Chapters, in: Economic Aspects of Health, pages 93-120, National Bureau of Economic Research, Inc.
    27. Ofer Malamud & Abigail K. Wozniak, 2010. "The Impact of College Education on Geographic Mobility: Identifying Education Using Multiple Components of Vietnam Draft Risk," NBER Working Papers 16463, National Bureau of Economic Research, Inc.
    28. Chaudhuri, Saraswata & Rose, Elaina, 2009. "Estimating the Veteran Effect with Endogenous Schooling When Instruments Are Potentially Weak," IZA Discussion Papers 4203, Institute of Labor Economics (IZA).
    29. Dionissi Aliprantis, 2013. "Covariates and causal effects: the problem of context," Working Papers (Old Series) 1310, Federal Reserve Bank of Cleveland.
    30. Hau Chyi & Orgul Demet Ozturk, 2013. "The Effects Of Single Mothers' Welfare Use And Employment Decisions On Children'S Cognitive Development," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 675-706, January.
    31. Shelly Lundberg, 2005. "Sons, Daughters, and Parental Behaviour," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(3), pages 340-356, Autumn.
    32. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records: Errata," American Economic Review, American Economic Association, vol. 80(5), pages 1284-1286, December.
    33. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    34. de Luna Xavier & Johansson Per, 2014. "Testing for the Unconfoundedness Assumption Using an Instrumental Assumption," Journal of Causal Inference, De Gruyter, vol. 2(2), pages 187-199, September.
    35. Lechner, Michael, 2008. "A note on endogenous control variables in causal studies," Statistics & Probability Letters, Elsevier, vol. 78(2), pages 190-195, February.
    36. Samuel Bazzi & Michael A. Clemens, 2013. "Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 152-186, April.
    37. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
    38. Fuchs, Victor R. (ed.), 1982. "Economic Aspects of Health," National Bureau of Economic Research Books, University of Chicago Press, number 9780226267852, September.
    39. Joshua D. Angrist & Stacey H. Chen, 2011. "Schooling and the Vietnam-Era GI Bill: Evidence from the Draft Lottery," American Economic Journal: Applied Economics, American Economic Association, vol. 3(2), pages 96-118, April.
    40. de Walque, Damien, 2007. "Does education affect smoking behaviors?: Evidence using the Vietnam draft as an instrument for college education," Journal of Health Economics, Elsevier, vol. 26(5), pages 877-895, September.
    41. Halbert White & Xun Lu, 2011. "Causal Diagrams for Treatment Effect Estimation with Application to Efficient Covariate Selection," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1453-1459, November.
    42. Huber, Martin, 2012. "Identifying causal mechanisms in experiments (primarily) based on inverse probability weighting," Economics Working Paper Series 1213, University of St. Gallen, School of Economics and Political Science, revised May 2013.
    43. Edward Vytlacil, 2002. "Independence, Monotonicity, and Latent Index Models: An Equivalence Result," Econometrica, Econometric Society, vol. 70(1), pages 331-341, January.
    44. Douglas H. Frank, 2012. "As Luck Would Have It: The Effect of the Vietnam Draft Lottery on Long-Term Career Outcomes," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(2), pages 247-274, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrei Barbos & Minglu Sun, 2021. "The effect of awarding disability benefits on opioid consumption," Health Economics, John Wiley & Sons, Ltd., vol. 30(11), pages 2794-2807, November.
    2. Xintong Wang & Alfonso Flores-Lagunes, 2022. "Conscription and Military Service: Do They Result in Future Violent and Nonviolent Incarcerations and Recidivism?," Journal of Human Resources, University of Wisconsin Press, vol. 57(5), pages 1715-1757.
    3. Kaspar Wüthrich, 2020. "A Comparison of Two Quantile Models With Endogeneity," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 38(2), pages 443-456, April.
    4. Sallin, Aurelién, 2021. "Estimating returns to special education: combining machine learning and text analysis to address confounding," Economics Working Paper Series 2109, University of St. Gallen, School of Economics and Political Science.
    5. Adrian Chadi, 2019. "Dissatisfied with life or with being interviewed? Happiness and the motivation to participate in a survey," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 53(3), pages 519-553, October.
    6. Bratti, Massimiliano & Mendola, Mariapia & Miranda, Alfonso, 2015. "Hard to Forget: The Long-Lasting Impact of War on Mental Health," IZA Discussion Papers 9269, Institute of Labor Economics (IZA).
    7. Bensch, Gunther & Gotz, Gunnar & Peters, Jörg, 2020. "Effects of rural electrification on employment: A comment on Dinkelman (2011)," Ruhr Economic Papers 840, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. Schaubert, Marianna, 2022. "Do courts know how to incentivize? Behavioral response of non-resident parents to child support obligations," Children and Youth Services Review, Elsevier, vol. 137(C).
    9. Gerten, Elisa & Beckmann, Michael & Kräkel, Matthias, 2022. "Information and Communication Technology, Hierarchy, and Job Design," IZA Discussion Papers 15491, Institute of Labor Economics (IZA).
    10. Eva Deuchert & Martin Huber & Mark Schelker, 2019. "Direct and Indirect Effects Based on Difference-in-Differences With an Application to Political Preferences Following the Vietnam Draft Lottery," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(4), pages 710-720, October.
    11. Eva Deuchert & Martin Huber, 2017. "A Cautionary Tale About Control Variables in IV Estimation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(3), pages 411-425, June.
    12. Aepli, Manuel, 2019. "Technological change and occupation mobility: A task-based approach to horizontal mismatch," GLO Discussion Paper Series 361, Global Labor Organization (GLO).
    13. Riedel, Nadine & Simmler, Martin & Wittrock, Christian, 2020. "Local fiscal policies and their impact on the number and spatial distribution of new firms," Regional Science and Urban Economics, Elsevier, vol. 83(C).
    14. Fenton Villar, Paul, 2020. "The Extractive Industries Transparency Initiative (EITI) and trust in politicians," Resources Policy, Elsevier, vol. 68(C).
    15. Masayuki Sawada, 2019. "Noncompliance in randomized control trials without exclusion restrictions," Papers 1910.03204, arXiv.org, revised Jun 2021.
    16. Mustafa Özer & Jan Fidrmuc, 2024. "Does Immigration Affect the Natives’ Mental Health? Causal Evidence from Forced Syrian Migration to Turkey," CESifo Working Paper Series 11399, CESifo.
    17. Glynn, Adam & Rueda, miguel & Schuessler, Julian, 2023. "Post-Instrument Bias in Linear Models," SocArXiv axn4t, Center for Open Science.
    18. Dertinger, Andrea & Hirth, Lion, 2020. "Reforming the electric power industry in developing economies evidence on efficiency and electricity access outcomes," Energy Policy, Elsevier, vol. 139(C).
    19. Aur'elien Sallin, 2021. "Estimating returns to special education: combining machine learning and text analysis to address confounding," Papers 2110.08807, arXiv.org, revised Feb 2022.
    20. Tran, My & Gannon, Brenda & Rose, Christiern, 2023. "The effect of housing wealth on older adults’ health care utilization: Evidence from fluctuations in the U.S. housing market," Journal of Health Economics, Elsevier, vol. 88(C).
    21. Schaubert, Marianna, 2018. "Behavioral Response of Non-Resident Parents to Child Support Obligations: Evidence From SOEP," EconStor Preprints 203675, ZBW - Leibniz Information Centre for Economics.
    22. Breen, Richard & Ermisch, John, 2021. "Instrumental Variable Estimation in Demographic Studies: The LATE interpretation of the IV estimator with heterogenous effects," SocArXiv vx9m7, Center for Open Science.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elena Kotyrlo & Elena Varshavskaya, 2022. "Impact of the compulsory military service reform of 2007–2008 on the demand for higher education," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(4), pages 715-735, October.
    2. de Walque, Damien, 2004. "Education, information, and smoking decisions : evidence from smoking histories, 1940-2000," Policy Research Working Paper Series 3362, The World Bank.
    3. Xintong Wang & Carlos A. Flores & Alfonso Flores-Lagunes, 2020. "The Effects of Vietnam-Era Military Service on the Long-Term Health of Veterans: A Bounds Analysis," Center for Policy Research Working Papers 234, Center for Policy Research, Maxwell School, Syracuse University.
    4. Peter Hull & Michal Kolesár & Christopher Walters, 2022. "Labor by design: contributions of David Card, Joshua Angrist, and Guido Imbens," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(3), pages 603-645, July.
    5. Jason M. Lindo & Charles Stoecker, 2014. "Drawn Into Violence: Evidence On “What Makes A Criminal” From The Vietnam Draft Lotteries," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 239-258, January.
    6. de Walque, Damien, 2007. "Does education affect smoking behaviors?: Evidence using the Vietnam draft as an instrument for college education," Journal of Health Economics, Elsevier, vol. 26(5), pages 877-895, September.
    7. Majbouri, Mahdi, 2017. "Sir! I'd Rather Go to School, Sir!," IZA Discussion Papers 10787, Institute of Labor Economics (IZA).
    8. Pierre Mouganie, 2020. "Conscription and the Returns to Education: Evidence from a Regression Discontinuity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(3), pages 1112-1139, July.
    9. Ryan D. Edwards, 2010. "Health, Income, and the Timing of Education Among Military Retirees," NBER Working Papers 15778, National Bureau of Economic Research, Inc.
    10. Johnston, David W. & Shields, Michael A. & Siminski, Peter, 2016. "Long-term health effects of Vietnam-era military service: A quasi-experiment using Australian conscription lotteries," Journal of Health Economics, Elsevier, vol. 45(C), pages 12-26.
    11. Kate Baldwin & Rikhil R. Bhavnani, 2013. "Ancillary Experiments: Opportunities and Challenges," WIDER Working Paper Series wp-2013-024, World Institute for Development Economic Research (UNU-WIDER).
    12. Daniel Grossman & John Cawley & Damien de Walque, 2018. "Effect of Stress on Later‐Life Health: Evidence from the Vietnam War Draft," Southern Economic Journal, John Wiley & Sons, vol. 85(1), pages 142-165, July.
    13. Phillip Heiler, 2020. "Efficient Covariate Balancing for the Local Average Treatment Effect," Papers 2007.04346, arXiv.org.
    14. Peter Siminski & Simon Ville, 2012. "I Was Only Nineteen, 45 Years Ago: What Can we Learn from Australia’s Conscription Lotteries?," Economics Working Papers wp12-06, School of Economics, University of Wollongong, NSW, Australia.
    15. Chris Rohlfs, 2010. "Does Combat Exposure Make You a More Violent or Criminal Person? Evidence from the Vietnam Draft," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
    16. Buckles, Kasey & Hagemann, Andreas & Malamud, Ofer & Morrill, Melinda & Wozniak, Abigail, 2016. "The effect of college education on mortality," Journal of Health Economics, Elsevier, vol. 50(C), pages 99-114.
    17. Huber, Martin & Wüthrich, Kaspar, 2017. "Evaluating local average and quantile treatment effects under endogeneity based on instruments: a review," FSES Working Papers 479, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    18. John Cawley & Damien de Walque & Daniel Grossman, 2017. "The Effect of Stress on Later-Life Health: Evidence from the Vietnam Draft," NBER Working Papers 23334, National Bureau of Economic Research, Inc.
    19. Baldwin Kate & Bhavnani Rikhil R., 2015. "Ancillary Studies of Experiments: Opportunities and Challenges," Journal of Globalization and Development, De Gruyter, vol. 6(1), pages 113-146, June.
    20. Bautista, María Angélica & González, Felipe & Martinez, Luis R. & Muñoz, Pablo & Prem, Mounu, 2020. "Does Higher Education Reduce Mortality? Evidence from a Natural Experiment in Chile," SocArXiv 5s2px, Center for Open Science.

    More about this item

    Keywords

    Instrument; control variables; conditional independence; covariates;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usg:econwp:2014:39. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/vwasgch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.