Swamy et al. (2015) argue that valid instruments cannot exist when a structural model is misspecified. This note shows that this is not true in general. In simple examples valid instruments can exist and can help to estimate parameters of interest.

The hedonic model of Rosen (1974) has become a workhorse for valuing the characteristics of differentiated products despite a number of well-documented econometric problems, including a source of endogeneity that has proven difficult to overcome. Here we outline a simple, likelihood-based...

One of the primary motivations behind the establishment of noncontributory pension programs is to allow beneficiaries to retire from the labor force. Yet, as with other unconditional cash transfer schemes, their aggregate effects may be more complex. Using panel data and instrumental variable...

Many researchers use the G-index or E-index to measure firms' takeover defenses. Others argue that these indices are not related to firms' takeover likelihoods. We find that, unlike their raw values, the instrumented versions of these indices are significantly and negatively related to...

A survey of 255 papers that rely on the instrumental variable (IV) approach for identifying causal effects published in the "Big Three" finance journals reveals that IV estimates are larger than their corresponding uninstrumented estimates in about 80% of the studies, regardless of whether the...

We derive nonparametric sharp bounds on average treatment effects with an instrumental variable (IV) and use them to evaluate the effectiveness of the Job Corps training program for disadvantaged youth. We focus on the population average treatment effect (ATE) and the average treatment effect on...