I am preparing for qualifying exams and ran across an old question asking me to show how I can obtain robust standard errors when using a control function approach to deal with an endogenous variable. Consider the model: $$y_i=X_i\beta_1 + W_i\beta_2+\epsilon_i$$ Assume: $$E[X_i\epsilon_i]=0$$ $$E[W_i\epsilon_i] \neq 0$$ Thus, $W_i$ is endogenous. Now, let: $$E[Z_iW_i] \neq 0$$ $$E[Z_i\epsilon_i]=0$$ The control function approach: - $W_i = \gamma_1 X_i + \gamma_2 Z_i + \phi_i $ - $\epsilon_i = \alpha \phi_i + \chi$ now we replace $\epsilon_i$ in our original equation: $$y_i=X_i\beta_1 + W_i\beta_2+ \phi_i \alpha + \chi$$ So now we have: $$E[W_i\epsilon_i]=0$$ Intuition: I think I used the series of linear projections to 'control' for the endogenous portion of $W_i$. Okay - the question. I think that $\hat \beta_{2.CF} \equiv \hat \beta_{2.OLS} \equiv \frac{cov(W_i,Y_i)}{Var(W_i)}$ If this is correct, do I just use the R.S.E. form that I use in OLS if I want heteroskedasticity robust S.E. when using the C.F. approach?