Endogeneity in quantile regression models: A control function approach |
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Authors: | Sokbae Lee |
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Institution: | Centre for Microdata Methods and Practice, Institute for Fiscal Studies and Department of Economics, University College London, London WC1E 6BT, UK |
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Abstract: | This paper considers a linear triangular simultaneous equations model with conditional quantile restrictions. The paper adjusts for endogeneity by adopting a control function approach and presents a simple two-step estimator that exploits the partially linear structure of the model. The first step consists of estimation of the residuals of the reduced-form equation for the endogenous explanatory variable. The second step is series estimation of the primary equation with the reduced-form residual included nonparametrically as an additional explanatory variable. This paper imposes no functional form restrictions on the stochastic relationship between the reduced-form residual and the disturbance term in the primary equation conditional on observable explanatory variables. The paper presents regularity conditions for consistency and asymptotic normality of the two-step estimator. In addition, the paper provides some discussions on related estimation methods in the literature. |
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Keywords: | C13 C14 C31 |
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