Estimating and Interpreting Models with Endogenous Treatment Effects

Posted: 4 Jan 2006

See all articles by Francis Vella

Francis Vella

Georgetown University; IZA Institute of Labor Economics

Marno Verbeek

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Abstract

The relationship between two alternative approaches, instrumental variables and control function procedures, for estimating the impact of endogenous treatment effects are examined. Although it is well known that the two approaches generate comparable estimates, the relationship between the estimators and their accompanying endogeneity tests appears not to be well understood. It is shown that the two procedures are closely related. The implications of the two procedures for the underlying economic sorting behavior are also examined.

Keywords: treatment effects, control function, instrumental variables

JEL Classification: C21, C24

Suggested Citation

Vella, Francis and Verbeek, Marno, Estimating and Interpreting Models with Endogenous Treatment Effects. Journal of Business and Economic Statistics, Vol. 17, pp. 473-478, 1999, Available at SSRN: https://ssrn.com/abstract=873526

Francis Vella

Georgetown University ( email )

Washington, DC 20057
United States
202-687-5573 (Phone)

HOME PAGE: http://explore.georgetown.edu/people/fgv/

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Marno Verbeek (Contact Author)

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)

HOME PAGE: http://www.rsm.nl/mverbeek

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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