A Note on Endogeneity Resolution in Regression Models for Comparative Studies

DOI10.5705/SS.202019.0459MaRDI QIDQ5067442zbMATH OpenOpenAlexFDO

Authors Ravi Kashyap

Publication date 1 April 2022

Published in STATISTICA SINICA (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2203.14255

zbMATH Keywords

biascoefficientscomparativeeconometricendogeneityexperimental designinstrumental variablequantitative methodologyregression modeltime series analysis

Mathematics Subject Classification ID

Design of statistical experiments (62K99) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to economics (62P20)

Abstract: We provide a justification for why, and when, endogeneity will not cause bias in the interpretation of the coefficients in a regression model. This technique can be a viable alternative to, or even used alongside, the instrumental variable method. We show that when performing any comparative study, it is possible to measure the true change in the coefficients under a broad set of conditions. Our results hold, as long as the product of the covariance structure between the explanatory variables and the covariance between the error term and the explanatory variables are equal, within the same system at different time periods or across multiple systems at the same point in time.

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Cited in

(4)

• When is it justifiable to ignore explanatory variable endogeneity in a regression model?
• When is it really justifiable to ignore explanatory variable endogeneity in a regression model?
• Endogeneity bias modeling using observables
• Instrument endogeneity and identification-robust tests: some analytical results

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