Introduction to Instrumental Variables (IV)

MIT's Josh Angrist introduces one of econometrics most powerful tools: instrumental variables.
Instrumental variables (IV, for those in the know), allow masters of econometrics to draw convincing causal conclusions when a treatment of interest is incompletely or imperfectly randomized.
For example, arguments over American school quality often run hot, boiling over with selection bias. See a school with strong graduation rates and enticing test scores? Is that a good school or just an ordinary school fortuitously located in a good neighborhood?
Lotteries that randomize offers of a school seat at in-demand schools should unravel the school quality conundrum. But lotteries only offer seats. Families are free to accept or go elsewhere and these choices are far from random.
IV provides a path to causal conclusions even in the face of this sort of incomplete randomization.
In this video, we cover the following:
- Incomplete random assignment
- IV terminology: first stage, second stage, instrument, reduced form
- Three key IV assumptions: substantial first stage, independence assumption, exclusion restriction
**INSTRUCTOR RESOURCES**
High school teacher resources: mru.io/7gg
Professor resources: mru.io/7rq
Econometrics test bank: mru.io/x9c
EconInbox: mru.io/qym
**MORE LEARNING**
Try out our practice questions: mru.io/pl8
See the full course: mru.io/z3a
Receive updates when we release new videos: mru.io/rgz
More from Marginal Revolution University: mru.io/4my

[@brayanlondono_]

I had to comment. This is more clearly presented and understandable than I ever would have imagined. I am taking a 4000 level econometrics course and the professor couldn't explain it this eloquently. Fantastic job!

[@austinlentsch]

This is actually a better refresher after a few years away from econometrics than any textbook or other video I’ve tried watching. Anyone can plug and play equations, really understanding what drives causality is much more difficult to explain and y’all killed it, cheers👌🏻

[@chalantika6103]

I can't tell how badly and desperately I was waiting for this video since I had completed the previous ones already ! Thank youuuuuuuu🤗🤗🤗🤗

[@c0mmissar1]

What an astonishingly engaging, clear and succinct summary, thank you!

[@MarginalRevolutionUniversity]

Thank you for the kind words! -Roman

[@smyumyu8526]

waiting for more to come! this is greatly illustrative!

[@lilsleekstallion]

Incredibly well done! Thank you for putting this together - it was so clear, easy to follow, and engaging. I wish all instruction was done like this. Really love and appreciate your educational approach - it makes such a difference!

[@PatapiaPapakalodouka]

Well said!!! Unfortunatelly, journalists don't know econometrics and they reach all the aforementioned inferences (the wrong ones)...

[@foxhyde7743]

This is a very good explanation of this concept. I am masters student and have had 3 professors who have not explained this concept as beautifully as this video. Thank you so much for this video

[@ibrahimisrafilov1248]

Finally back!!! I was waiting for it as it was my fav series on Netflix 😃

[@MarginalRevolutionUniversity]

Thanks for the kind words! These aren't as hard to produce as a Netflix series, but it's close :-) -Roman

[@ibrahimisrafilov1248]

@@MarginalRevolutionUniversitythank you Roman. when will be available approximately a topic on regression?

[@raulfernandez4643]

Thanks a lof for making lessons so entertaining and clear, I wished I had them back when I was at University... I can't wait to watch the next ones!

[@bababouibababoui4726]

Love the animation style, like archer, and the fact that I’m also learning econometrics is just the best

[@freedman1405]

At long last! Another econometrics video!

[@alexfrank1831]

Awesome, sadly i already finished my studies but I am learning for life here now!

[@MarginalRevolutionUniversity]

Welcome to our little band of lifelong learners! We're doing the same. -Roman

[@chalantika6103]

But the video on 'Introduction to Regression Analysis' and 'How to read economics RPs on Regression analysis ' seems missing 😰 This video on instrumental variables comes much later in the list !! 😶

[@MarginalRevolutionUniversity]

@@chalantika6103 Don't worry, those are coming too. We're releasing some out of order just to get them out as fast as possible. But all are being worked on.

[@lavacake9284]

These videos are so helpful! When are the other parts going to be released?? Looking forward to the regression analysis video!

[@vascoamaralgrilo]

Great lessons! Will more videos in the series be published soon?

[@kirsten1263]

please continue making these!!

[@arifmemovic3383]

Wow. Fantastic video!

[@nowba33]

Pure genius. I love this.

[@linhdanxauxi5790]

I love this series! Just wished there were more episodes!!

[@MarginalRevolutionUniversity]

We're working on them! More coming! -Roman

[@vilhelmjuhler1811]

I don't usually comment, but I randomly stumbled across this video as I'm covering it in class. The examples immediately seemed familiar and that's because I'm using your textbook too! Just a recommendation to anyone watching this that the textbook is great as well

[@appex5451]

That's a great video but when part 2 coming?

[@MarginalRevolutionUniversity]

This is the sixth video in our Mastering Econometrics course. Full course: mru.io/sjk Practice questions: mru.io/91u Econometrics test bank: mru.io/ukc Get updated when we release the next video: mru.io/usv High school teacher resources: mru.io/gbd Professor resources: mru.io/oyj

[@fufu3539]

Are you more a Bruce Lee or a Jackie Chan guy?

[@edmundoribeiro4456]

AMAZING!

[@Stella-yr2cu]

You beautiful human being. Thank you for this video

[@sugandhaverma4505]

Please make more & more vedios in this series & thank you so much for this vedio 🙏🙏🙏

[@MarginalRevolutionUniversity]

We are working on them! Sign-up to get an email notification when we release them: mru.io/38fe8f Thanks for your interest! -Roman

[@rentianzhu5775]

This is the best education!!!!

[@Guldmann266]

At 8:18, you surely meant: "Increases your chance of attending KIPP by 74 percentage points", rather than "makes you 74% more likely to attend KIPP". Those are two very different things :P

[@joshangrist4578]

good catch!

[@tantruongkhanh1312]

thank you :))

[@EmBennet99]

Hello - are there plans to continue this series? I saw "coming soon" on some of the videos like the Regression video (on the MRU website). Thanks!

[@ganweijun3976]

This is so good!! better than my teachers in university lol

[@tobiaszichner9760]

The announced video (sequel to this) didn't release (yet) or have I missed something? The video in the endcard regarding differences in differences doesn't build on IV or on the example mentioned in the end or am I wrong and that is the sequel indeed?

[@almontheralmonther9712]

I like your videos a lot on econometrics but I don’t know why you haven’t posted new videos recently you had only eight videos in the series which is so so limited. Thank you

[@mokeyrock]

We want the next episodeeeeee

[@garyboy7135]

Which is the second video in the series?

[@ivan09182000]

For real, can i donate to your channel?

[@Nanji9]

where is part 2?

[@sugandhaverma3655]

Sir, when will you upload next part of this series??

[@MarginalRevolutionUniversity]

Next one should be out in the next month (diff-in-diff)! You can sign-up to get notified here: mru.org/mastering-econometrics-subscribe -Roman

[@sugandhaverma3655]

@@MarginalRevolutionUniversity okay sir, thank you

[@hakayma7560]

how to create 'will'

[@sarangjoglekar1197]

Nerdiest shit I have ever seen. But extremely helpful. Keep making these videos🙌 Please make one on Regression discointinity too

[@ArunKumar-yb2jn]

Damn, this was waiting to be clicked!

[@user-jj9lj5kc9m]

때가 왔다

[@raj-kumar1674]

🤗🤗🤗🤗🤗🤗

[@hw_plainview1179]

The reason why NYC public schools got so bad is because they eliminated merit through the "Detracking" movement which eliminated gifted, honors, and special progress programs from public schools.

[@byrdiethemighty]

daily district oversight and teacher union contracts...oh no 🙄. Charter ( and private schools) seek to take away funds set aside for public schools by the government to better segregate the populace. Just have public school and make them good so everyone has the same chance to capitalize on their skills.