Consistency without Inference: Instrumental Variables in Practical Application

I use the bootstrap to study a comprehensive sample of 1400 instrumental variables regressions in 32 papers published in the journals of the American Economic Association. IV estimates are more often found to be falsely significant and more sensitive to outliers than OLS, while having a higher mean squared error around the IV population moment. There is little evidence that OLS estimates are substantively biased, while IV instruments often appear to be irrelevant. In addition, I find that established weak instrument pre-tests are largely uninformative and weak instrument robust methods generally perform no better or substantially worse than 2SLS. *I am grateful to Ruoqi Zhou for excellent research assistance.