This session will consider econometric approaches to addressing endogeneity issues when exploring questions of the political economy of institutions. We will consider how causality may be established using econometric techniques, and what sorts of limitations such techniques may possess, especially with regard to potential abuses and misuses. The main reading is an example of careful empirical work illustrating some of these techniques, and the additional content references provide additional examples. The technical references are for those interested in diving into the technical aspects of causality in greater detail.

Bibliographical references :

Must Read: Nunn, Nathan, and Leonard Wantchekon. 2011. "The Slave Trade and the Origins of Mistrust in Africa." American Economic Review 101(5) (Dec): 3221--52.
Online: http://dx.doi.org/10.1257/aer.101.7.3221

Additional Content References:

Acemoglu, K. Daron, Davide Cantoni, Simon H. Johnson, and James A. Robinson. 2011. "The Consequences of Radical Reform: The French Revolution." American Economic Review 101(5) (Dec): 3221--52.
Online: http://dx.doi.org/10.1257/aer.101.7.3286

Spilimbergo, Antonio. 2009. "Democracy and Foreign Education." American Economic Review 99(1) (Mar): 528--43. Online: http://dx.doi.org/10.1257/aer.99.1.528

Additional Technical References:

Baum, Christopher F., Mark E. Schaffer, and Steven Stillman. 2003. "Instrumental Variables and GMM: Estimation and Testing." Stata Journal 3(1) (1st Q): 1--31.

Kraay, Aart C. 2010. "Instrumental Variables with Honestly Uncertain Exclusion Restrictions." Journal of Applied Econometrics 27(1) (Jan/Feb): 108--28.
Online: http://dx.doi.org/10.1002/jae.1148

Parente, Paulo M.D.C., and J.M.C. Santos Silva. 2012. "A Cautionary Note on Tests of Overidentifying Restrictions." Economics Letters 115(2) (May): 314--17.
Online: http://dx.doi.org/10.1016/j.econlet.2011.12.047

Roodman, David. 2009. "A Note on the Theme of Too Many Instruments." Oxford Bulletin of Economics and Statistics 71(1) (Feb): 135--58.
Online: http://dx.doi.org/10.1111/j.1468-0084.2008.00542.x