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The Nonexistence of Instrumental Variables

By Stephen G. Hall, George S. Tavlas and P. A. V. B. Swamy

Abstract

The method of instrumental variables (IV) and the generalized method of moments (GMM) has become a central technique in health economics as a method to help to disentangle the complex question of causality. However the application of these techniques require data on a sufficient number of instrumental variables which are both independent and relevant. We argue that in general such instruments cannot exist. This is a reason for the widespread finding of weak instruments

Publisher: Dept. of Economics, University of Leicester
Year: 2011
OAI identifier: oai:lra.le.ac.uk:2381/9270

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