Session 3: Dealing with Reverse Causality

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IntroductionDealing with EndogeneityExamples of IV Gravity ModelsSummarySession 3: Dealing with Reverse CausalityBen ShepherdPrincipal, Developing Trade Consultants Capacity Building Workshop for Trade Research:Gravity ModelingThursday, August 26, 2010Ben ShepherdSession 3: Dealing with Reverse CausalityIntroductionDealing with EndogeneityExamples of IV Gravity ModelsSummaryOutline1IntroductionOvervie wEndogeneity and its Consequences2Dealing with EndogeneityAd Hoc SolutionsIV Estimation3Examples of IV Gravity Models Trading on Time (Djankov et al., 2008) Contract Enforcement (Ranjan & Lee, 2007)4SummaryBen ShepherdSession 3: Dealing with Reverse CausalityIntroductionDealing with EndogeneityExamples of IV Gravity ModelsSummaryOverviewEndogeneity and its ConsequencesOutline1IntroductionOverview Endogeneity and its Consequences2Dealing with EndogeneityAd Hoc SolutionsIV Estimation3Examples of IV Gravity Models Trading on Time (Djankov et al.)

variable in the regression is only a proxy for the variable we are interested in. Loss of precision in some cases. No way of gauging empirically how serious the endogeneity problem is, and whether the solution is adequate to deal with it. Ben Shepherd Session 3: Dealing with Reverse Causality

  Reserve, Causality, Regression, Reverse causality