Consistently Bounding Parameter Values with One Instrument and Two Endogenous Explanatory Variables: With an Application to the Effect of Fast-Food Availability on Obesity
26 Pages Posted: 30 Oct 2009
Date Written: October 30, 2009
Abstract
The current paper considers a linear regression framework with two endogenous regressors, but only one instrument that is correlated with both. I demonstrate that under reasonable conditions, these different sources of endogeneity act in opposing directions and hence IV regression can generate economically meaningful bounds. The method is then used to bound the effect of fast-food availability on weight outcomes when the proposed instrument is the number of interstate exits in the county of residence. No economically meaningful relationship is found, suggesting that how other firms respond to the presence of interstates does not affect parameter estimates.
Keywords: endogeneity, instrumental variables, bounding, obesity, fast-food, under-identification
JEL Classification: C31, C12, I10
Suggested Citation: Suggested Citation
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