REndo: An R Package to Address Endogeneity Without External Instrumental Variables

Journal of Statistical Software, Forthcoming

63 Pages Posted: 11 Feb 2022

See all articles by Raluca Gui

Raluca Gui

University of Zurich

Markus Meierer

University of Zurich

Patrik Schilter

University of Zurich

René Algesheimer

University of Zurich

Date Written: May 23, 2020

Abstract

Endogeneity is a common problem in any causal analysis. It arises when the independence assumption between an explanatory variable and the error in a statistical model is violated. The causes of endogeneity are manifold and include response bias in surveys, omission of important explanatory variables, or simultaneity between explanatory and response variables. Instrumental variable estimation provides a possible solution. However, valid and strong external instruments are difficult to find. Consequently, internal instrumental variable (IIV) approaches have been proposed to correct for endogeneity without relying on external instruments. Our R (R Core Team 2017) package REndo implements various IIV approaches, i.e., latent instrumental variables estimation (Ebbes, Wedel, Boeckenholt, and Steerneman 2005), higher moments estimation (Lewbel 1997), heteroskedastic error estimation (Lewbel 2012), joint estimation using copula (Park and Gupta 2012) and multilevel GMM estimation (Kim and Frees 2007). Package usage is illustrated on simulated and real-world data.

Keywords: endogeneity, internal instrumental variables, multilevel models.

Suggested Citation

Gui, Raluca and Meierer, Markus and Schilter, Patrik and Algesheimer, René, REndo: An R Package to Address Endogeneity Without External Instrumental Variables (May 23, 2020). Journal of Statistical Software, Forthcoming , Available at SSRN: https://ssrn.com/abstract=3974740

Raluca Gui

University of Zurich

Rämistrasse 71
Zürich, CH-8006
Switzerland

Markus Meierer

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Patrik Schilter

University of Zurich

Rämistrasse 71
Zürich, CH-8006
Switzerland

René Algesheimer (Contact Author)

University of Zurich ( email )

Department of Business Administration
Andreasstrasse 15
Zurich, 8050
Switzerland

HOME PAGE: http://www.market-research.uzh.ch

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
77
Abstract Views
189
rank
425,317
PlumX Metrics