March 2014

IZA DP No. 8048: Instrumental Variables: An Econometrician's Perspective

published in: Statistical Science, 2014, 29 (3), 3232 - 358

I review recent work in the statistics literature on instrumental variables methods from an econometrics perspective. I discuss some of the older, economic, applications including supply and demand models and relate them to the recent applications in settings of randomized experiments with noncompliance. I discuss the assumptions underlying instrumental variables methods and in what settings these may be plausible. By providing context to the current applications a better understanding of the applicability of these methods may arise.