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Control Function Methods in Applied Econometrics

Control Function Methods in Applied Econometrics abstract: This paper provides an overview of control function (CF) methods for solving the problem of endogenous explanatory variables (EEVs) in linear and nonlinear models. CF methods often can be justified in situations where “plug- in” approaches are known to produce inconsistent estimators of parameters and partial effects. Usually, CF approaches require fewer assumptions than maximum likelihood, and CF methods are computationally simpler. The recent focus on estimating average partial effects, along with theoretical results on nonparametric identification, suggests some simple, flexible parametric CF strategies. The CF approach for handling discrete EEVs in nonlinear models is more controversial but approximate solutions are available. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Human Resources University of Wisconsin Press

Control Function Methods in Applied Econometrics

Journal of Human Resources , Volume 50 (2) – May 8, 2015

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Publisher
University of Wisconsin Press
Copyright
©by the Board of Regents of the University of Wisconsin System
ISSN
1548-8004
Publisher site
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Abstract

abstract: This paper provides an overview of control function (CF) methods for solving the problem of endogenous explanatory variables (EEVs) in linear and nonlinear models. CF methods often can be justified in situations where “plug- in” approaches are known to produce inconsistent estimators of parameters and partial effects. Usually, CF approaches require fewer assumptions than maximum likelihood, and CF methods are computationally simpler. The recent focus on estimating average partial effects, along with theoretical results on nonparametric identification, suggests some simple, flexible parametric CF strategies. The CF approach for handling discrete EEVs in nonlinear models is more controversial but approximate solutions are available.

Journal

Journal of Human ResourcesUniversity of Wisconsin Press

Published: May 8, 2015

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