Selection and integration of generalized instrumental variables for estimating total effects

We consider a situation where cause–effect relationships between variables can be described as a directed acyclic graph (DAG) and the corresponding linear structural equation model (linear SEM). When several pairs of instrumental variables (IVs) and covariates (IV-pairs; Pearl in: Proceedings of the 20th conference on uncertainty in artificial intelligence, AUAI Press, Arlington, Virginia, United States, UAI’04, 2004) are available, we propose (i) the graphical selection criteria of IV-pairs for total effects and (ii) an integrated estimator that combines them to estimate total effects with better accuracy. In this paper, in accordance with the paper by Brito and Pearl (in: Proceedings of the 18th conference on uncertainty in artificial intelligence, Morgan Kaufmann Publishers Inc., San Francisco, CA, USA, UAI’02, 2002), the proposed estimator is called an integrated generalized instrumental variable (iGIV) estimator. The proposed graphical selection criteria imply that (a) the back-door criterion achieves better estimation accuracy than the traditional instrumental variable (IV) method of estimating total effects even when the treatment and covariates are highly correlated and (b) the conditional IV method can be superior to the back-door criterion in some situations. The iGIV estimator provides a general class that includes both the ordinary least squares (OLS) estimator based on the back-door criterion and the two-stage least squares (2SLS) estimator based on the (conditional) IV method. We clarify the properties of the iGIV estimator, some of which can be read off from the DAG structure. Furthermore, through numerical experiments and an application to a case study, we show that the performance of the iGIV estimator is superior to those of the OLS and IV estimators. The iGIV estimator can be a powerful tool to estimate the total effect when the proposed graphical selection criteria of the IV-pairs are not satisfied.