Instrumental variables (IV) is a framework for making causal inferences about the effect of a treatment based on an observational study in which there are unmeasured confounding variables. The most common form of IV estimation is two-stage least squares (2SLS), which works well when the outcome of interest is continuous. However, in many policy settings the objective is to estimate the effect o...

This paper proposes a new two stage least squares (2SLS) estimator which is consistent and asymptotically normal in the presence of many weak and irrelevant instruments and heteroskedasticity. In the first stage the estimator uses an adaptive absolute shrinkage and selection operator (LASSO) that selects the relevant instruments with high probability. However, the adaptive LASSO estimates have ...

In 2015, over 7 million Japanese citizens donated a total of ¥165,291,021,000 (approximately 1.5 billion USD) to municipalities in which they did not live in using the “Furusato Nouzei” system, which was developed as a means to revitalize rural areas in the country (Ministry of Internal Affairs and Communications). In this paper, I examine this system in two ways. First, I predict the amount of...

This introduction to the R package systemfit is a slightly modified version of Henningsen and Hamann (2007), published in the Journal of Statistical Software. Many statistical analyses (e.g., in econometrics, biostatistics and experimental design) are based on models containing systems of structurally related equations. The systemfit package provides the capability to estimate systems of linear...

This paper derives the limiting distributions of alternative jackknife IV (JIV ) estimators and gives formulae for accompanying consistent standard errors in the presence of heteroskedasticity and many instruments. The asymptotic framework includes the many instrument sequence of Bekker (1994) and the many weak instrument sequence of Chao and Swanson (2005). We show that JIV estimators are asym...

This paper shows that neither OLS nor 2SLS can generically identify policy trade offs in the linear case, except under extreme assumptions. Practitioners must be content with near identification and discusses how to choose between these two methods. It a two-stage approach using preference proxies elicit hidden information potentially narrow gap simple specification test used assess whether rea...