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Identification and Estimation of Triangular Simultaneous Equations Models Without Additivity

44 Pages Posted: 21 Nov 2002  

Guido W. Imbens

Stanford Graduate School of Business

Whitney K. Newey

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 2002

Abstract

This paper investigates identification and inference in a nonparametric structural model with instrumental variables and non-additive errors. We allow for non-additive errors because the unobserved heterogeneity in marginal returns that often motivates concerns about endogeneity of choices requires objective functions that are non-additive in observed and unobserved components. We formulate several independence and monotonicity conditions that are sufficient for identification of a number of objects of interest, including the average conditional response, the average structural function, as well as the full structural response function. For inference we propose a two-step series estimator. The first step consists of estimating the conditional distribution of the endogenous regressor given the instrument. In the second step the estimated conditional distribution function is used as a regressor in a nonlinear control function approach. We establish rates of convergence, asymptotic normality, and give a consistent asymptotic variance estimator.

Suggested Citation

Imbens, Guido W. and Newey, Whitney K., Identification and Estimation of Triangular Simultaneous Equations Models Without Additivity (November 2002). NBER Working Paper No. t0285. Available at SSRN: https://ssrn.com/abstract=353751

Guido W. Imbens (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Whitney K. Newey

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-262D
Cambridge, MA 02142
United States
617-253-6420 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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