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Historical Instruments and Contemporary Endogenous Regressors

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Abstract

We provide a simple framework for interpreting instrumental variable regressions when there is a gap in time between the impact of the instrument and the measurement of the endogenous variable, highlighting a particular violation of the exclusion restriction that can arise in this setting. In the presence of this violation, conventional IV regressions do not consistently estimate a structural parameter of interest. Building on our framework, we develop a simple empirical method to estimate the long-run effect of the endogenous variable. We use our bias correction method to examine the role of institutions in economic development, following Acemoglu et al. (2001). We find long-run coefficients that are smaller than the coefficients from the original work, demonstrating the quantitative importance of our framework.

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  • Gregory Casey & Marc Klemp, 2021. "Historical Instruments and Contemporary Endogenous Regressors," Department of Economics Working Papers 2021-02, Department of Economics, Williams College.
    • Handle: RePEc:wil:wileco:2021-02
    DOI: 10.36934/wecon:2021-02
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    Cited by:

    1. Becker, Sascha O. & Panin, Amma & Pfaff, Steven & Rubin, Jared, 2025. "Religion and Economic Development: Past, Present, and Future," LIDAM Discussion Papers CORE 2025006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Trung V. Vu, 2022. "Does institutional quality foster economic complexity? The fundamental drivers of productive capabilities," Empirical Economics, Springer, vol. 63(3), pages 1571-1604, September.
    3. Hamang, Jonas, 2024. "Economic development and known natural resource endowment: Discovery rate differentials of oil," Journal of Development Economics, Elsevier, vol. 170(C).
    4. Gan Jin & Günther G. Schulze, 2024. "Historical Legacies and Urbanization: Evidence from Chinese Concessions," Discussion Paper Series 47 JEL Classification: N9, Department of International Economic Policy, University of Freiburg, revised Feb 2024.
    5. Natalí Basilico & Ana Karen Guerrero Chaparro & Jesús Eduardo López Mares & Darío Figueroa, 2022. "Efectos de las instituciones en la dinámica emprendedora del Mercosur durante el período 2002-2017," Revista Tendencias, Universidad de Narino, vol. 23(2), pages 100-122.
    6. Buchner, Martin & Rose, Julian & Johannesson, Magnus & Malan, Mandy & Ankel-Peters, Jörg, 2025. "Seeking Scientific Consensus - An Expert Survey on the Replication Debate between Acemoglu et al. (2001) and Albouy (2012)," I4R Discussion Paper Series 270, The Institute for Replication (I4R).
    7. Fenske, James & Gupta, Bishnupriya & Mukhopadhyay, Anwesh, 2025. "Colonial Persistence," CAGE Online Working Paper Series 752, Competitive Advantage in the Global Economy (CAGE).
    8. Alberto Bisin & Andrea Moro, 2020. "LATE for History," NBER Working Papers 28113, National Bureau of Economic Research, Inc.
    9. Nobel Prize Committee, 2024. "Scientific Background to the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2024," Nobel Prize in Economics documents 2024-2, Nobel Prize Committee.
    10. Jin, Gan & Schulze, Günther G., 2025. "The long-term effect of western customs institution on firm innovation in China," Journal of Economic Behavior & Organization, Elsevier, vol. 237(C).
    11. Gan Jin & Günther G. Schulze, 2024. "The Long-Term Effect of Western Customs Institution on Firm Innovation in China," CESifo Working Paper Series 10967, CESifo.
    12. Jeanet Sinding Bentzen & Gunes Gokmen, 2023. "The power of religion," Journal of Economic Growth, Springer, vol. 28(1), pages 45-78, March.
    13. John William Hatfield & Katrina Kosec & Luke P. Rodgers, 2024. "Housing values and jurisdictional fragmentation," Public Choice, Springer, vol. 201(1), pages 83-122, October.

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    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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