Negative Control Falsification Tests for Instrumental Variable Designs

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. (JEL C12, C18, C26, C52)

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Publication Details

Journal
American Economic Review
Published
2026-03-31
DOI
https://doi.org/10.1257/aer.20240636
Primary Topic
Advanced Causal Inference Techniques
Type
article
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article

Negative Control Falsification Tests for Instrumental Variable Designs

Daniel Nevo, Dan Zeltzer, Oren Danieli, Bar Weinstein et al.
American Economic Review
Advanced Causal Inference Techniques
article

Negative Control Falsification Tests for Instrumental Variable Designs

Daniel Nevo, Dan Zeltzer, Oren Danieli, Bar Weinstein, Itai Walk
article en

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. (JEL C12, C18, C26, C52)

American Economic ReviewVol. 116(4)
Tel Aviv University (IL), University of California, Berkeley (US)
Reduced inequalities
Openalex Percentile: Top 7%
Advanced Causal Inference Techniques
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