Questions tagged [endogeneity]

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Self-selection problem can be solved in panel data analysis?

Assume that there are two variables $x$ and $y$ and they both have trend. For example, (case 1) During covid-19, government spending($x$) and inflation($y$) are both increased (case 2) A productive ...
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What if the instrumental variable is endogenous in first stage

Suppose $y=\beta_0+\beta_1 x+u,E(xu)\not=0,E(u)=0$. $z$ satisfies $E(zu)=0$ (exogenous) and $Cov(x,u)\not=0$ (relevance). In first stage, we do $x=\pi_0+\pi_1z+v$ and get $\pi_1=\frac{S.Cov(x,v)}{Var(...
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Different estimates from 2SRI and fixed effects regression. is this endogeneity?

I am comparing two different models to resolve potential endogeneity concerns in my empirical models. First, I ran fixed-effects models without handling any endogeneity concerns, and I got significant ...
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How to control for prices when they are endogenously set by hospitals?

Basically, I want to see how changes in hospital prices for a certain procedure can be used to predict quality of treatment. Problem is in my sample, the private hospitals are price makers so any ...
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Decoding Endogenous vs Exogenous - Parameter vs Decision Variable - and Independent vs Dependent

this is a topic that i feel is very implicit in a lot of economics, but is some times brushed over in interest of getting strait to the model or the maths. But often i realise i don't actually know ...
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Omitted Variable Bias with interaction terms

Suppose we have the long regression $$ y = \alpha + \beta D + \gamma X + \varepsilon $$ but instead use the short regression $$ y = \alpha + \beta D + \varepsilon $$ then one can show that the OLS ...
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Simultaneity intuition for correlated error terms

I'm reading through Asymptotic Theory for Econometricians by Halbert White and am trying to figure out the intuition for situations where the errors would be correlated. Here's the setup: $Y_{t1} = Y_{...
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Endogenous growth model with externalities

I have a following model of endogenous growth where each firm has the following technology; $$y_t=AK_t^{1-\alpha} k_t^{\alpha} n_t^{1-\alpha}$$ The production function above defines an externality. I ...
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Technology as an endogenous economic variable

Most of the economic literature on technical progress either treats it as an exogenous variable, often as a stochastic shocks or without specifying the origin of technological progress. On the other ...
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Can missing data cause endogeneity problem?

I am a econometrics newbie. I would like to ask a question. In the standard Hausman Taylor model, we need to specify exogeneous/endogenous variables for estimation. See: https://kb.iu.edu/d/bcfo ...
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When can I assume that a variable is exogenous?

I'm looking for the effect of nutritional coffee breaks on MBA performance, and I found that the change to a healthier catering increased the performance of MBA students. Additionally, I want to see ...
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Instrumental variable analysis for non-linear endogenous variable

I have a model of the form $$y_i = ax_{1i} + bx_{1i}^2 + cx_{3i} + \varepsilon_i$$ Where $x_1$ is an endogenous variable. Would I need instruments for both $x_1$ and $x_1^2$ or do I only need to ...
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Is it okay to combine two control variables into one in order to get a more precise estimate of the coefficient on the main explanatory variable?

I am studying a natural experiment that resulted in some cities randomly receiving different numbers of competitors in a certain sector. (Stores applied for licenses in a government-run lottery.) In ...
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What is the example of inaccurate impact due to endogeneity?

When learning about endogenous variable, I found an answer in a topic on StackExchange very direct: An Exogenous Variable is defined as a variable which is unaffected by other variables within an ...
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What does "endogeneity of the industry structure" means?

Dong,2019,page 899 documented that: We estimate Export Market Leniency Laws as the weighted average of the passage of leniency programs in all other countries, excluding the country in which the firm ...
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Predicting covariates into "observed" and "unobserved" part

I recently saw a paper where they run a regression of the covariate of interest $X_{1}$ on the outcome $Y\in\{0,1\}$ without further controls $$ Y = \alpha_{1} + \beta_{1} X_{1} + \epsilon_{1} \tag{1}...
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Is this an an endogeneity/simultaneity problem?

I would like to know if the logic in these two situations is correct. Situation 1: Let's say we have a continuous dependent variable, $y_1$, that then has a causal impact on an unobserved variable, $\...
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Is this an endogeneity problem?

Let's say we want to determine the impact of $y_2$ on $y_1$, which are related as follows: $$y_1 = f(y_2, x_1,e)$$ where $$e = g(y_3,x_2, u_1), \space y_2 = h(y_4,x_3, u_2), \space y_3 = m(y_4, x_4,...
Ryan da Silva's user avatar
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Using dependent variable's and exogenous variables' lags as instruments in 2SLS

Suppose we have the following structural equations: $$y=\beta_0+\beta_1x+\beta_2z_z+\beta_3z_3+\epsilon,$$ where $x$ is the endogenous variable and $z_1,z_2$ are exogenous variables. In the literature,...
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Intuition behind the Endogeneity Test (the Hausman Test)

Suppose we have the following simple regression model (time series framework)" $$y_1=\beta_0+\beta_1 y_2+\beta_2 z_1 +\beta_3 z_2 +u,$$ where $z_1$ and $z_2$ are exogenous and $y_2$ is either ...
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is endogeneity a problem in the first-stage regression in a two-stage least square regression?

We have this model: $$D=\alpha_1+\gamma_1 Z + \epsilon_1$$ $$Y=\alpha_2+\gamma_2 D + \epsilon_2$$ Notations are as usual: Y is the outcome, D is the treatment, Z is the instrument Two conditions for ...
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Some confusions about instrumental variable (econometrics)

As the title says, I have some confusions about instrumental variable. According to my lecture note (which is supposed to be reliable), instrumental variable has two big properties: Validity: an ...
Math is like Friday's user avatar
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Why do we treat demographic variables as being exogenous?

I I would like to ask about demographic variables. In general, we usually include those variables as independent variables when we run regressions such as wage equation or test score equation. What ...
user25173's user avatar
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The rationale for using a lagged variable to address endogeneity arising from simultaneous causation?

when there is simultaneous causation between dependent and independent variables often in papers we see a lagged variable being used in place of contemporaneous variable. For example, Clemens, ...
Peter Santorin's user avatar
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If an endogenous explanatory variable is serially correlated does it mean that its lags are also endogenous?

in panel data when examining economic growth determinants lags are often used to account for endogeneity of explanatory variables. However if the explanatory variable is serially correlated, does it ...
Peter Santorin's user avatar
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Endogeneity problem with a dummy variable

I have a panel data model as following, $$Y_{it}=intercept +B_1X_{it}+B_2Q_{it}+error_{it}$$ where $i$ is for firm and $t$= time. $Y$= trade credit demand, $X$= inventory cycle, as inventory ...
krkc_bhdr's user avatar
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Justification for my Random Effects estimation

I need to defend my use of the Random Effects (RE) estimator in my economics project. I've been told in cross validated that the proper place for the question is here. The causal effect of the ...
Kelly's user avatar
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Can all the regressors be endogenous in a given model?

I'm trying to estimate the following model: Labor demand=f(wages,lagged labor demand, GFCF, GDP, trade share, labor productivity, real exchange rate)... (1) Wages= f(labor demand,lagged wages, GFCF, ...
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Confounding versus endogenous variables. What is their relative hierarchical position?

There are valuable resources on the lexicon of types of variables quickly accessible, such as here. However, some of these concepts appear side-by-side often enough to make them confusing. For ...
Antoni Parellada's user avatar
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3 answers
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Does endogeneity matter when neither independent variable nor error term are correlated with dependent variable?

if the double arrows show that X and the error term are correlated, but that neither variable affects Y, is endogeneity a problem in this scenario? Why or why not?
Henry Walsh's user avatar
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Testing for Endogeneity

I apologize if this question is very basic. I have the following plain vanilla Instrumental Variable model. $Y=\alpha+X\beta+\varepsilon$ $X=\delta+Z\gamma+\eta$ $\varepsilon\perp\eta,\quad Z\perp\...
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Addressing endogenity in price elasticity and the Promotion Optimization Problem

I have data on purchases gross prices discounts (like coupons) net prices (i.e. gross price - discounts) number of leads (potential customers at any given time) conversion rates (# purchases / # ...
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How to test if variables are jointly determined?

If I wanted to test, for example, if consumption growth and credit growth are jointly determined, and therefore justifying the use of instrumental variables, how would I go about this? Would running a ...
user11687's user avatar
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1 answer
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Count panel models for endogenous regressors

I have a count variable as the dependent variable and several continuous regressors on the RHS. The dependent variable and some regressors are supposed to be endogenous to unobserved factors. I have a ...
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Sources of the endogeneity of money in New Keynesian economics (Woodford)

I am trying to wrap my head around Woodford's "Interest and Prices" so I have a question regarding the source of the endogeneity of the money supply in his models. The Post Keynesian view is that ...
Aleksander's user avatar
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Selection bias - Will multiple regressions solve the problem?

Now I have a data from an African country concerning (i) levels of corruption across public sectors and (ii) perceptions of service quality from households (bad, medium and high). The data consist two ...
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