Economics, Econometrics and Finance
4 years ago

Instrument Overload Weakens Validity of Economic Studies, Reveals Hidden Endogeneity.

Oxford Bulletin of Economics and Statistics
A Note on the Theme of Too Many Instruments<sup>*</sup>
David Roodman

Paper Summary

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The article discusses how using certain statistical methods can lead to having too many instruments, which can affect the accuracy of the results. By looking at previous studies on income inequality and financial sector development, the researchers found that having too many instruments can cause issues with the data analysis. They suggest simple ways to control the number of instruments to improve the validity of the results.