How to use instrumental variables in addressing endogeneity? A step-by-step procedure for non-specialists

Ullah, Subhan; Zaefarian, Ghasem; Ullah, Farid

Abstract

Endogeneity issues in empirical research have received increasing academic attention. Tackling endogeneity problems effectively and using the appropriate estimation techniques are important quality benchmarks in the publication process of many academic journals. In this paper, we discuss the use of instrumental variables (IVs) in business and marketing research, with a particular focus on its implementation in STATA. We discuss several pre-and postestimation tests that researchers can use to implement various versions of IVs in STATA, including two-stage least squares regression, limited information maximum likelihood estimation, and generalized method of moments.

Citation

Ullah, S., Zaefarian, G., & Ullah, F. (2021). How to use instrumental variables in addressing endogeneity? A step-by-step procedure for non-specialists. Industrial Marketing Management, 96, A1-A6. https://doi.org/10.1016/j.indmarman.2020.03.006

• Journal Article Type: Article
• Acceptance Date: Mar 9, 2020
• Online Publication Date: Mar 20, 2020
• Publication Date: 2021-07
• Deposit Date: Mar 24, 2020
• Publicly Available Date: Mar 21, 2022
• Journal: Industrial Marketing Management
• Print ISSN: 0019-8501
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 96
• Pages: A1-A6
• DOI: https://doi.org/10.1016/j.indmarman.2020.03.006
• Keywords: Instrumental variables; Endogeneity; Two-stage least squares; Limited information maximum likelihood; Generalized method of moments 2
• Public URL: https://nottingham-repository.worktribe.com/output/4197776
• Publisher URL: https://www.sciencedirect.com/science/article/abs/pii/S0019850120302078