RT Journal Article
SR Electronic
T1 On the Validity of Econometric Techniques with Weak Instruments
JF Journal of Human Resources
JO J Hum Resour
FD University of Wisconsin Press
SP 393
OP 410
DO 10.3368/jhr.XL.2.393
VO XL
IS 2
A1 Luiz M. Cruz
A1 Marcelo J. Moreira
YR 2005
UL http://jhr.uwpress.org/content/XL/2/393.abstract
AB We evaluate Angrist and Krueger (1991) and Bound, Jaeger, and Baker (1995) by constructing reliable confidence regions around the 2SLS and LIML estimators for returns-to-schooling regardless of the quality of the instruments. The results indicate that the returns-to-schooling were between 8 and 25 percent in 1970 and between 4 and 14 percent in 1980. Although the estimates are less accurate than previously thought, most specifications by Angrist and Krueger (1991) are informative for returns-to-schooling. In particular, concern about the reliability of the model with 178 instruments is unfounded despite the low first-stage F-statistic. Finally, we briefly discuss bias-adjustment of estimators and pretesting procedures as solutions to the weak-instrument problem.