On the Effect of Imputation on the 2SLS Variance

Abstract

Endogeneity and missing data are common issues in empirical research. We investigate how both jointly affect inference on causal parameters. Conventional methods to estimate the variance, which treat the imputed data as if it was observed in the first place, are not reliable. We derive the asymptotic variance and propose a heteroskedasticity robust variance estimator for two-stage least squares which accounts for the imputation. Monte Carlo simulations support our theoretical findings.