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Instrument-Hacking

Author

Listed:
  • Keane, Michael
  • Neal, Timothy
  • Vu, Patrick

Abstract

In instrumental-variable (IV) studies, researchers often evaluate multiple candidate instruments and selectively report the specification with the most favorable first- or second-stage statistics. We show that this form of instrument selection ("instrument-hacking") induces median bias in IV estimators toward the OLS estimand, undermining the rationale for using IV. When all candidate instruments have the same true strength, median bias increases monotonically with the number of available instruments. More generally, when candidate instruments differ in true strength, monotonicity need not hold because increasing the number of instruments can lead researchers to select genuinely stronger instruments. Nonetheless, in simulations calibrated to the empirical distribution of instrument strengths in the IV literature, median bias increases monotonically with the number of available instruments. Furthermore, it is substantial in magnitude, even when only a few instruments are available.

Suggested Citation

  • Keane, Michael & Neal, Timothy & Vu, Patrick, 2026. "Instrument-Hacking," I4R Discussion Paper Series 319, The Institute for Replication (I4R).
  • Handle: RePEc:zbw:i4rdps:319
    as

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    References listed on IDEAS

    as
    1. David S. Lee & Justin McCrary & Marcelo J. Moreira & Jack Porter, 2022. "Valid t-Ratio Inference for IV," American Economic Review, American Economic Association, vol. 112(10), pages 3260-3290, October.
    2. Angrist, Joshua & Kolesár, Michal, 2024. "One instrument to rule them all: The bias and coverage of just-ID IV," Journal of Econometrics, Elsevier, vol. 240(2).
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