Ecological Inferencewith Instrumental Variables

This note observes that instrumental variables techniques are useful not only for estimating causal effects, but that they simultaneously solve the ecological inference problem. ∗Correspondence can be addressed to the author at MEDS Department, Kellogg School of Management, 2001 Sheridan Rd, Evanston, IL 60208, or by email: [email protected]. The ecological inference problem is one of the most infamous econometric probelms in the social sciences. Below, I show that standard instrumental variable techniques provide a useful tool for conducting ecological inferences. To see see the intuition behind ecological inference with instrumental variables (EI-IV), consider a data generating process of the following form: