I am working on a project called "Diversity and Team Performance: Evidence from Indian Premier League." There might be some endogeneity in the team diversity as the players are not randomly assigned to the teams. I am sure that, the endogeneity issue here must be minimum. However, the referee will definitely ask for it when publishing. So, I am looking for a good Instrumental Variable (IV). Anyone have any idea about it?
By the way, i tried the 2009 problem of not playing Pakistan players. But the change is very small. And if it is, it might have affected 2009 and to minimum 2010 season. I am looking forward to your suggestion.
Perhaps one possible IV could be the auction price of the players/budget of the teams.
Thank you, Prof. Suresh Chand Aggarwal and Ji Liu, for your suggestion. This could be a good IV. But the budget for each team is equal every year. Furthermore, the players are recruited through a second price auction process. Therefore, there is a competitive balance among teams. Local population diversity is difficult to identify as all teams are based in larger cities. I have no idea as of now. I need to show that the teams choose players based on their performance rather than any personal preference.
If you haven't, I suggest you read "Bifurcated Effects of Place‐of‐Origin Diversity on Individual and Team Performance: Evidence from Ten Seasons of German Soccer" maybe their method and arguments can help. Or look at performance before and after diversity changes and is not entirely the coaches decision (i.e. an injury during the game).