TY - CHAP
T1 - The pitfalls of ignoring outliers in instrumental variables estimations
T2 - An application to the deep determinants of development
AU - Dehon, Catherine
AU - Desbordes, Rodolphe
AU - Verardi, Vincenzo
N1 - Funding Information:
Acknowledgements Catherine Dehon gratefully acknowledges research support from the IAP research network grant nr. P7/06 of the Belgian government (Belgian Science Policy) and from the ARC contract of the Communauté Française de Belgique. Catherine Dehon is also member of ECORE, the association between CORE and ECARES.
Publisher Copyright:
© 2015, Springer International Publishing Switzerland.
Copyright:
Copyright 2019 Elsevier B.V., All rights reserved.
PY - 2015
Y1 - 2015
N2 - The extreme sensitivity of instrumental variables (IV) estimators to outliers is a crucial problem too often neglected or poorly dealt with. We address this issue by making the practitioner aware of the existence, usefulness, and inferential implications of robust-to-outliers instrumental variables estimators. We describe how the standard IV estimator can be made robust to outliers, provide a brief description of alternative robust IV estimators, simulate the behaviour of both the standard IV estimator and each robust IV estimator in presence of different types of outliers, and conclude by replicating a celebrated study on the deep determinants of development in order to establish the danger of ignoring outliers in an IV model.
AB - The extreme sensitivity of instrumental variables (IV) estimators to outliers is a crucial problem too often neglected or poorly dealt with. We address this issue by making the practitioner aware of the existence, usefulness, and inferential implications of robust-to-outliers instrumental variables estimators. We describe how the standard IV estimator can be made robust to outliers, provide a brief description of alternative robust IV estimators, simulate the behaviour of both the standard IV estimator and each robust IV estimator in presence of different types of outliers, and conclude by replicating a celebrated study on the deep determinants of development in order to establish the danger of ignoring outliers in an IV model.
KW - Asian Tiger
KW - Endogenous Regressor
KW - Institutional Quality
KW - Instrumental Variable
KW - Instrumental Variable Estimator
UR - http://www.scopus.com/inward/record.url?scp=85064941981&partnerID=8YFLogxK
U2 - 10.1007/978-3-319-03122-4_12
DO - 10.1007/978-3-319-03122-4_12
M3 - Chapter
AN - SCOPUS:85064941981
T3 - Advanced Studies in Theoretical and Applied Econometrics
SP - 195
EP - 213
BT - Advanced Studies in Theoretical and Applied Econometrics
PB - Springer
ER -
