Valid instrumental variables must be relevant and exogenous. However, in practice it is difficult to find instruments that are exogenous in that they satisfy the knife-edged orthogonality condition and at the same time are strongly correlated with the endogenous regressors. In this paper we show...

We show that when instruments are nearly exogenous, the two stage least squares t-statistic unpredictably over-rejects or under-rejects the null hypothesis that the endogenous regressor is insignificant and Anderson-Rubin test over-rejects the null. We prove that in the limit these tests are no...

We show that when instruments are nearly exogenous, the two stage least squares t-statistic unpredictably over-rejects or under-rejects the null hypothesis that the endogenous regressor is insignificant and Anderson-Rubin test over-rejects the null. We prove that in the limit these tests are no...

There is a growing consensus that it is difficult to pick instruments that perfectly satisfy the exclusion restriction. Drawing on results from Berkowitz, Caner, and Fang (2012, Journal of Econometrics 166: 255–266), we provide in this article a nontechnical summary of how valid inferences can...

We develop a dynamic model of collusion in airport-pair routes for selected US airlines and specify the first order conditions using a state-space representation that is estimated by Kalman-filtering techniques using the Databank 1A (DB1A) Department of Transportation (DOT) data during the...