182 IV9c the order condition

This video explains the fundamental order condition for instrumental variable (IV) estimations, a crucial first step to determine if you have enough instruments for your analysis. The order condition is a simple counting rule that states you need at least as many instruments as endogenous variables to identify causal effects. Failing to meet this condition, known as under-identification, means the model cannot be estimated, and the only solution is to find more instruments. While necessary, satisfying the order condition is not sufficient, as the instruments must also provide independent information, which is addressed by the rank condition. Visit AxiomTutoring.com and subscribe to @AxiomTutoringCourses.