Can't Hack It!
As the academic year from hell reaches completion, the sun emerges, and the ability to go on vacation resumes, we should all have a little spring in our step and a growing sense of optimism. Then comes a new NBER WP that puts a damper in the moods of many people. Aside from the topic itself, many comments have focused on the Instrumental Variable (IV) strategy used in the paper. Forgetting about the specific model at hand, the authors are perfectly upfront about the fact that two instruments are considered, but only one is chosen after seeing the results of some specification tests. And that brings me to the subject of this blog that I have wanted to write for a while, but lacked the mental bandwidth to do so. The issue at hand is pre-test bias; a subject I have written about here and here . The notion is simple, but unfortunately is not well understood it seems by many applied researchers. I, too, was grossly deficient in my understanding coming out of graduate school. It wasn