In words, why can utilizing an instrumental variable be an effective means toward identifying the causal effect of a treatment on an outcome?
A) It allows you to identify the causal effect of the treatment by controlling for unobservables that may crucially affect the outcome.
B) It allows you to identify the causal effect of the treatment by using only variation in the treatment that is correlated with unobservables that affect the outcome.
C) It allows you to identify the causal effect of the treatment by using only variation in the treatment that isn't correlated with unobservables that affect the outcome.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

Instrumental variables allow for the identification of causal effects by using variation in the treatment that is not correlated with unobserved variables that could confound the relationship between the treatment and the outcome. This helps in isolating the direct effect of the treatment from other factors.

In Words, Why Can Utilizing an Instrumental Variable Be an Effective