In instrumental variable regression, structural parameter estimation relies on knowledge of the correlation between the structural error and the instruments. The current practice is to assume that this correlation is zero. However, this assumption is unlikely to be satisfied in applied work. In...

Currently, the commonly employed instrumental variables strategy relies on the knife-edge assumption of perfect exogeneity for valid inference. To make reliable inferences on the structural parameters under violations of exogeneity one must know the true correlation between the structural error...