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Instrumental Variable Estimation 1

Instrumental Variable Estimation 1. Returns to education. David Card (1995) IV: distance to college Individual data, U.S. males, 1976. Log Earnings Education. Distance to college. OLS. log(wage) = β 0 + β 1 ed + β 2 ’x + u. IV (2SLS). IV for educ: nearc4

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Instrumental Variable Estimation 1

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  1. Instrumental Variable Estimation 1 Returns to education. David Card (1995) IV: distance to college Individual data, U.S. males, 1976 Log Earnings Education Distance to college

  2. OLS log(wage) = β0 + β1ed + β2’x + u

  3. IV (2SLS) IV for educ: nearc4 (technically all other exog RHS variables incl.)

  4. Reduced form and 1st stage Reduced form: 1st stage:

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