A Generalized Application of Instrumental Variable Estimation to Straight-Line Relations When Both Variables Are Subject to Error

Pseudo-instrumental variables, defined generally as functions of the independent or predictor variables, are utilized in the estimation of straight-line relations when both variables are subject to error. For such relations it is known that some form of prior information is necessary for purposes of estimation. As such, we assume that the independent variables are only partially in error and write the instrumental variable as a function of the correct portion of the independent variable. This technique leads to consistent slope and intercept estimates and may have broader applications than the Wald-Bartlett estimation techniques.