Use Of Instrumental Variables Research Articles

EXPRESS: Correcting Regressor-Endogeneity Bias via Instrument-free Joint Estimation using Semiparametric Odds Ratio Models

Endogenous regressors can lead to biased estimates for causal effects using methods assuming regressor–error independence. To correct for endogeneity bias, the authors propose a new method that accounts for the regressor–error dependence using flexible semiparametric odds ratio conditional models; the approach requires neither parametric distributional assumptions nor tuning parameters for modeling endogenous regressors' distributions conditional on the error term and exogenous regressors. Inference is achieved via optimizing the profile likelihood concentrating on the parameters of interest. The proposed approach requires no use of instrumental variables (IVs), observed or latent, that must satisfy the stringent condition of exclusion restriction. Nonnormally distributed endogenous regressors are required for model identification with a normal error distribution. The approach's exibility in capturing regressor-error dependence increases the capability of Ivfree endogeneity correction and provides opportunities to improve the accuracy of causal effect estimation. Unlike existing IV-free methods, the proposed approach can handle discrete endogenous regressors with few levels, such as binary regressors or count regressors with small means, and is thus applicable to a plethora of applications involving such regressors. The authors demonstrate the versatility of the approach for binary, count, and continuous endogenous regressors using comprehensive simulation studies and an empirical data.

Approaches To The Factors Involved In The Economic And Productive Performance Of Dairy Farmas In The Pampas Region

Bovine milk production is carried out in complex productive systems that require constant monitoring of the factors that question them. Likewise, the sector needs to understand the stagnation of annual production at the national level, characterized by a drop in the number of establishments and herds, and a progressive productive efficiency. This entails the study of the determinants of both the economic (EP) and productive (PP) performance of the establishments, what could allow them to improve their competitiveness and, together with other exogenous factors, collaborate to overcome this prolonged stage of productive stability. Starting from a typology of dairy farms in the Pampas Region, the behavior of variables (profitability, cost of production and productivity of the land) and their interrelationship are analyzed. Finally, flexible econometric models that approximate the estimation of the economic and productive performance of the systems under study are formed and analyzed, based on factors that may be decisive for their evolution. The best models resulted from those that used synthetic variables (principal components) as inputs, compared to those that made us and selection of system-specific variables, correcting problems of multicollinearity. The use of instrumental variables could contribute to the resolution of the multicausality present among the factors of the models analyzed.

Structural adjustment and the political economy of capital flight

The financial haemorrhaging of lower income countries in the form of capital flight is a leading cause of global economic inequality. On an annual basis, trillions of dollars bypass the already starved fiscal spaces of nations mired in poverty, making their way instead to lucrative offshore bank accounts governed by secrecy jurisdictions. The present article relates this phenomenon to the institutional architecture of the global financial system and provides causal evidence that structural adjustment programmes implemented at the behest of international financial organizations amplify such capital flight. In particular, by isolating exogenous variation in policy conditionalities through the use of instrumental variables, we find that trade liberalization, financial sector reforms and privatization measures mandated by the International Monetary Fund in developing contexts substantially increase financial outflows occurring via current and capital account transactions. Our findings thus document the contribution that structural adjustment makes to an underappreciated facet of contemporary global inequality.

Economic Analysis of the Effect of Social Capital on Food Security Status of Micro-Credit Households in Ekiti State Nigeria

This study examined the effects of social capital on food security status of microcredit households in Ekiti-state, Nigeria. Multi-stage sampling procedure was used in selecting the sample for the study. The data for the study were collected by using a well-structured questionnaire from three hundred and eighty-six microcredit households in Ekiti-state. The data were analysed using descriptive, Foster, Greer and Thorbecke measure and probit regression model. The result showed that the average age of the sampled heads of households was 47.3years. Average years of formal education and size of households in the study area were about 6.8 years and 7 persons respectively. The results of the social capital dimensions in the study area showed that the average membership density index was 37.25% while decision making participation index was 61.44%. Heterogeneity and meeting attendance indices were 52.89% and 45.02% respectively. Cash and labour indices were 40.42% and 21.18% respectively. The mean social capital value was 12.10%. The results of the probit regression showed that age, age squared, household size, occupation, years of formal education, membership density, decision making participation, meeting attendance and heterogeneity indices of households significantly influenced food security. The use of instrumental variables led to an increase in the value of adjusted from 0.3760 to 0.3996 relative to the use of the real social capital index. It is recommended that policy that will make households (particularly food insecure ones) participate in associations should be formulated.

The spatial scope of agglomeration economies in Brazil

AbstractThis paper provides evidence about location and colocation patterns of manufacturing entrepreneurship and spatial scope of agglomeration economies in the context of a developing country. Using microgeographic data for all Brazilian manufacturing activities and distance‐based measures, we find clear patterns of colocalization between entrants and existing establishments, and that these patterns occur mainly at short distances. For activities presenting colocalization between entrants and existing establishments, our results also indicate that a greater number of incumbent establishments in a given location positively affects the number of entrant establishments that decide to locate there, an effect that attenuates rapidly with distance (generally disappearing after 5 km). This pattern of attenuation is robust to both the inclusion of a comprehensive set of controls for observable and unobservable local characteristics and the use of instrumental variables to address remaining endogeneity concerns.

Common methodological mistakes

For scientific discoveries to be valid—whether in theory or empirically—a phenomenon must be accurately described: The scientist must use appropriate counterfactuals and eliminate competing explanations. Empirical work must also use an appropriate design and method, and empirical claims made about the phenomenon must be correctly characterized. Moreover, valid empirical discoveries must be reliable in the sense that scientists who reexamine the data must be able to reproduce the finding or to replicate the effect from data gathered in a similar context. Only discoveries adhering to the above criteria can be scientifically informative, serve as building blocks for theory, or have policy implications. Unfortunately, as several recent surveys of the literature show, much of the published works in the management and applied psychology fields are uninformative; contributing reasons include several intractable problems in the study design and analysis as well as the failure of the field to adopt open science practices. Against this backdrop, we identify common methodological mistakes made in applied work. We group these mistakes into three major categories: (a) study design and data collection (e.g., fit between hypotheses and methods, design, measurement, open science, literature reviews), (b) data analysis (e.g., data preprocessing, choice of estimators, analysis of data, issues concerning endogeneity, and use of instrumental variables), and (c) diagnostics, inferences, and reporting. We also explain how to avoid these issues, so that published work makes for a useful contribution to the scientific record.

Research on Managerial Overconfidence, Corporate Financial Risk and Corporate Surplus Management

Based on the data of A-share listed companies in Shanghai and Shenzhen from 2008 to 2018, this paper investigates the impact of corporate financial risk on corporate surplus management and further tests the heterogeneous role of power concentration and overconfidence on corporate financial risk through heterogeneity analysis. The empirical findings show that (i) all else being equal, corporate financial risk has a significant contribution to corporate surplus management, i.e., an increase in corporate financial risk causes firms to engage in surplus management behavior; further heterogeneity analysis results show that (ii) all else being equal, overconfident firms have an inhibitory effect on the positive relationship between financial risk and surplus management. In addition, the paper finds that the previous findings remain robust through lagged variable regressions, the use of instrumental variables and the replacement of different measures of surplus management. Finally, the paper combines the findings with corresponding policy recommendations and insights.

Vertical taxing rights and tax compliance norms

This paper investigates the effects of multi-layer tax arrangements on tax compliance norms and behaviours of individuals in 49 Latin American and African countries. To date, the literature on tax compliance predominantly portrays the government-taxpayer relationship as bilateral. In practice, however, taxpayers have multiple payment obligations and often towards more than one tier of government. This paper argues for the consideration of multi-level tax arrangements in cross-country empirical enquiries on tax compliance norms and behaviours. It draws from the existing literature to posit that the vertical decision structure on tax matters by different government layers could influence tax compliance through, for instance, altering enforcement parameters, affecting compliance costs or shaping the fiscal exchange between citizens and the State through elements of trust, perception of public accountability and redistribution, and public utility. The empirical findings suggest that assigning taxing rights and discretionary powers on tax administration to subnational governments lower tendencies of compliance. The paper confirms the overarching hypothesis that inter-governmental tax arrangements matter for understanding tax compliance norms. The results are robust to multiple specifications, including the use of instrumental variables to address endogeneity concerns.

Does Smartphone Use Improve the Dietary Diversity of Rural Residents? Evidence from Household Survey Data from 5 Provinces.

The use of smartphones has profoundly changed the consumption patterns and living conditions of rural residents, but there is little research on how smartphone use affects the food consumption patterns of rural residents. This paper uses survey data from 1047 farmers from five Chinese provinces in 2020 to investigate the impact of smartphone use on the dietary diversity of rural residents, the underlying mechanism, and the corresponding group-level heterogeneity. The study finds that smartphone use has a significantly positive effect on the dietary diversity of rural residents and that the dietary diversity scores of rural residents who use smartphones to access the internet are a significant 4.2% higher than those of rural residents who do not. The results are robust to the use of instrumental variables and propensity score matching to account for potential endogeneity. The income effect and the transaction cost effect are the two mechanisms by which smartphone use improves the dietary diversity of rural residents. Compared with elderly residents and members of low-income households, young and middle-aged people and members of high-income households are more likely to use smartphones to improve their dietary diversity. The following recommendations for further improving the dietary diversity of rural residents are made: continue to increase the internet penetration rate and smartphone coverage rate in rural areas, conduct public welfare lectures on smartphone usage and nutrition and health knowledge, and improve the e-commerce distribution infrastructure in rural areas.

Robot adoption and export performance: Firm-level evidence from Spain

Export activities are crucial for firm performance. Existing evidence shows that technology adoption is an essential determinant of firm competitiveness. Nevertheless, scarce attention has been devoted to robotisation, a new technology that firms increasingly adopt. We investigate the effect of robot adoption on the intensive and extensive margins of exports of Spanish manufacturing firms over the period 1990–2014. We combine the propensity score matching (PSM) and difference in differences (DID) techniques and find that firms adopting robots experience a sharp increase in their export probability, export sales and share of exports in total output. This result persists after a wide array of robustness checks, including the use of instrumental variables. Robot adoption favours export entry and survival and fosters the export activity of intermediate goods’ producers. The positive impact of robot adoption on exports is driven by its positive effect on firm total factor productivity, product innovation and importing.

RETRACTED: A Study on the Participation of Peasants in Rural Environmental Improvement From the Perspective of Sustainable Development

Peasants are producers and the direct stakeholders of rural environmental problems, and also the core subject of the comprehensive rural ecological improvement. However, in the current mode of rural environmental governance, the government takes the dominant role, with low participation of peasants. Based on the representative micro-survey data of China, and from the perspective of the psychosocial effects of the peasants’ self-identification, this research made use of instrumental variables and generalized structural equation mode (GSEM) to explore the reason behand this phenomenon. The research shows that, first, at present Chinese peasants have a low degree of self-identification, and self-identification has a remarkable and positive stimulating effect on the participation of peasants in rural ecological improvement; second, heterogeneity analysis shows that self-identification is a stronger incentive for peasant groups with female offspring and rural families with relatively higher incomes in the participation of rural environmental improvement, and is a less remarkable incentive for rural families with relatively low incomes; and third, the mediation model results indicate that social fairness and social capital are important mediating paths with which self-identification influences the participation of peasants in rural environmental improvement, and the exertion of the stimulating effect of self-identification on the participation in rural environmental improvement is inseparable from the coordination and integration of the perception effect of peasants as the behavioral subject in terms of social fairness, and is still more inseparable from the support of corresponding social capital. What we’ve discovered means that the enhancement of self-identification of peasants by strengthening the construction of public cultural services and cultural guidance in rural area is the crucial element to motivate the peasants to participate in rural environmental improvement so as to realize sustainable rural development.

Social media, education, and the rise of populist Euroscepticism

This paper studies how the diffusion of skeptical or negative attitudes towards the European Union (EU) and the process of European integration relates to the new technologies of political communication, education, and their interaction. Using both European-wide and national surveys, we find a strong relationship between exposure to online political activity and Euroscepticism only among individuals with lower formal education. When distinguishing between different forms of online political activity it also finds that it is not the use of the internet per se that matters, but the specific use of social networks, like Twitter or Facebook, for obtaining information about politics. These results turn out to be robust to the use of instrumental variables intended to capture the speed of connection available and the relative easiness of using internet and social media.

Impact of the Belt and Road Initiative on environmental quality in countries along the routes

China has adhered to the concept of green development since the introduction of the Belt and Road Initiative in 2013. However, as the initiative continues to advance, speculations have been raised on the possibility of its reduction of the environmental quality of the countries along the routes. So, has the seven-year-old Belt and Road Initiative reduced the environmental quality of these countries and how does it affect the environmental quality? To address these issues, this study conducted a quasi-natural experiment, based on the WDI 2005－2017 data, the human development index database of the World Bank and the OECD (Organization for Economic Cooperation and Development) database. A country-year panel data was constructed using the difference-in-differences model to assess the countries along the‘area’initiative for environmental effects, and to further examine the heterogeneity and the policy effect mechanism. The main conclusions were as follows: ① The Belt and Road Initiative had significantly improved the environmental quality of countries along the routes. The conclusions remained robust after the introduction of the placebo test, the use of instrumental variables to alleviate possible endogenous problems and a series of other robustness tests. ② The results of heterogeneity analysis showed that the Belt and Road Initiative exerted a greater effect on the countries with lower environmental quality than those with higher quality in terms of environmental improvements. ③ Mechanism analysis showed that the Belt and Road Initiative improved the environmental quality of countries along the routes by promoting technological progress and strengthening environmental regulation, but it failed to significantly improve the environmental quality of these countries by promoting clean energy structure and industrial structure and increasing the scale effect. Therefore, China should continue to vigorously promote the concept of developing a green Belt and Road, expand the coverage of the green Belt and Road, improve the level of clean energy structure of the Belt and Road countries through investment and cooperation, and promote the clean transformation of their industrial structure. These findings provide empirical evidence and implications for the better promotion of the green Belt and Road Initiative, and have certain reference value for the follow–up implementation of the Belt and Road Initiative.

Digital Inclusive Finance, Multidimensional Education, and Farmers’ Entrepreneurial Behavior

Scarce financial supply and low education level are important factors that inhibit the entrepreneurial behavior of rural residents in China. Based on the Static Career Choice Model, this paper matches the 2016 China Household Finance Survey (CHFS) micro-data with the Peking University Digital Financial Inclusive Index of the previous years to empirically test the impact of digital financial inclusion and academic education, tacit knowledge, and Internet learning on farmers. The direct influence and linkage effect of entrepreneurial behaviors revealed that digital financial inclusion and multidimensional education could significantly promote farmers’ entrepreneurial choices. Digital financial inclusion can relieve the constraints of insufficient academic education on farmers’ entrepreneurial choices, partially replace the tacit knowledge for rural residents, and improve the efficiency of Internet learning, which ultimately enhances the entrepreneurial behavior choices of the farmers. Our results are still significant and robust with respect to the sample data, explained variables, and estimation methods. We also consider the use of instrumental variables to overcome the potential endogeneity issues. Through comparative analysis of different regions, it is found that the performance is particularly obvious in the eastern region.

Addressing the issue of bias in observational studies: Using instrumental variables and a quasi-randomization trial in an ESME research project.

PurposeObservational studies using routinely collected data are faced with a number of potential shortcomings that can bias their results. Many methods rely on controlling for measured and unmeasured confounders. In this work, we investigate the use of instrumental variables (IV) and quasi-trial analysis to control for unmeasured confounders in the context of a study based on the retrospective Epidemiological Strategy and Medical Economics (ESME) database, which compared overall survival (OS) with paclitaxel plus bevacizumab or paclitaxel alone as first-line treatment in patients with HER2-negative metastatic breast cancer (MBC).Patients and methodsCausal interpretations and estimates can be made from observation data using IV and quasi-trial analysis. Quasi-trial analysis has the same conceptual basis as IV, however, instead of using IV in the analysis, a “superficial” or “pseudo” randomized trial is used in a Cox model. For instance, in a multicenter trial, instead of using the treatment variable, quasi-trial analysis can consider the treatment preference in each center, which can be informative, and then comparisons of results between centers or clinicians can be informative.ResultsIn the original analysis, the OS adjusted for major factors was significantly longer with paclitaxel and bevacizumab than with paclitaxel alone. Using the center-treatment preference as an instrument yielded to concordant results. For the quasi-trial analysis, a Cox model was used, adjusted on all factors initially used. The results consolidate those obtained with a conventional multivariate Cox model.ConclusionUnmeasured confounding is a major concern in observational studies, and IV or quasi-trial analysis can be helpful to complement analysis of studies of this nature.

Testing regional intergovernmental transfers effects in Uruguay

Using an unbalanced panel of 18 Uruguayan regional governments from 1991 to 2017, we explore the hypothesis of flypaper and asymmetrical effects on the regional public expenditures. Specifically, the flypaper hypothesis states that the propensity of sub-national governmental units to spend intergovernmental unconditional transfers is higher than the propensity to spend on the demand for regional public services by local private agents. The application of panel data techniques with the use of instrumental variables highlights the presence of sizeable flypaper effect but not asymmetry ones. Our estimations also identify that political economy factors play an important role in the regional budgeting processes in Uruguay. This paper contributes to the scarce empirical evidence about the effects of unconditional central government transfers on subnational finances for middle-income countries.

The income equality dividend in ‘green’ infrastructure: Evidence from the transport and waste sectors in the OECD

As it is exemplified by the Sustainable Development Goals, countries are expected to advance towards both decreasing environmental harmfulness and reducing income inequality. However, although debates can be found on how to succeed in each of these two challenges, less is known about how income distribution is affecting environmental achievements. In this article, the authors propose the concept of an ‘income equality dividend’ regarding adoption of sustainable modes within infrastructure networks in high income countries. Evidence is provided to show that more egalitarian countries do better adopting mature environmental technologies within infrastructure networks, such as municipal recycling and railway passenger transport. Panel data from the OECD, covering between 1996 and 2013, shows that the adoption rates of these environmental technologies are higher in countries with more egalitarian income distributions. The use of instrumental variables allows to prove that the link is exogenous. In addition, adoption of mature environmental technologies seems to respond more strongly to changes in the income shared by different groups, depending on the sector. While railway passenger transport is more strongly linked to changes in shares of the bottom 40 per cent and the top 10 per cent, municipal recycling is linked to income shares by the upper half of the bottom 40 per cent, and not affected at all by the share of the rich. The income equality dividend can be explained both due to changes in consumer behaviour on the demand side, and to institutional factors reflected by income distribution, on the supply side.

Income segregation's impact on local public expenditures: Evidence from municipalities and school districts, 1980–2010

Residential income segregation within local political jurisdictions has risen considerably since 1980 in the U.S. Despite this trend, and a growing body of research on wealth inequality and its impact on public sector size, income segregation's own influence over local public choice has not been thoroughly investigated. Using block-group income distributions for the years 1980, 1990, 2000, and 2010 income segregation is measured for individual U.S. municipalities and school districts, where the spatial distribution of income may carry the most political relevance. Estimates indicate that rising income segregation reduced per-capita spending growth considerably for both municipalities and school districts. These findings are robust to various model specifications and to the use of instrumental variables that adjust for the potential endogeneity of local income segregation. This evidence is consistent with the view that intra-jurisdictional income segregation undermines trust between community members and complicates collective action. However, a-spatial income inequality continues to be positively correlated with local public sector size, as suggested by recent empirical research.

Recent Advances in Empirical Land-Use Modeling

Data sets providing repeated observations of land use at fine spatial scales have enabled a new generation of land-use studies. In the past decade, these analyses have put increasing emphasis on empirical research designs that provide more convincing causal estimates. I review the use of instrumental variables, matching, difference-in-differences, regression discontinuity design, and randomized controlled trials in the recent land-use economics literature, exploring how new data have made possible the use of these research designs. I show that these estimators have produced different results than were obtained with traditional approaches and have provided new insights into important land-use policy issues such as additionality and spillover effects.

Identifying treatment effects in the presence of confounded types

In this paper, I consider identification of treatment effects when the treatment is endogenous. The use of instrumental variables is a popular solution to deal with endogeneity, but this may give misleading answers when the instrument is invalid. I show that when an (unobserved) instrument is invalid due to correlation with the first stage unobserved heterogeneity, a proxy for the instrument helps partially identify not only the local average treatment effect, but also the entire potential outcomes distributions for compliers. I exploit the fact that the distribution of the observed outcome in each group defined by the treatment and the instrument is a mixture of the distributions of interest. I write the identified set in the form of conditional moment inequalities, and provide an easily implementable inference procedure. Under some tail restrictions, the potential outcomes distributions are point-identified for compliers. Finally, I illustrate my methodology on data from the National Longitudinal Survey of Young Men to estimate returns to college using college proximity as a proxy for the instrument low college cost. I find that a college degree increases the average hourly wage of the compliers by 15%–30%.