American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Negative Control Falsification Tests for Instrumental Variable Designs
American Economic Review
(pp. 1380–1414)
Abstract
The validity of instrumental variable (IV) designs is typically tested using two types of falsification tests. We characterize these tests as conditional independence tests between negative control variables—proxies for unobserved variables posing a threat to the identification—and the IV or the outcome. We describe the conditions variables must satisfy in order to serve as negative controls. We show these falsification tests examine not only independence and the exclusion restriction but also functional form assumptions. Our analysis reveals conventional applications of these tests may flag problems even in valid IV designs. We offer implementation guidance to address these issues.Citation
Danieli, Oren, Daniel Nevo, Itai Walk, Bar Weinstein, and Dan Zeltzer. 2026. "Negative Control Falsification Tests for Instrumental Variable Designs." American Economic Review 116 (4): 1380–1414. DOI: 10.1257/aer.20240636Additional Materials
JEL Classification
- C12 Hypothesis Testing: General
- C18 Methodological Issues: General
- C26 Single Equation Models: Single Variables: Instrumental Variables (IV) Estimation
- C52 Model Evaluation, Validation, and Selection