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Excess heterogeneity, endogeneity and index restrictions

Authors: Andrew Chesher
Date: 30 September 2009
Type: Journal article, Journal of Econometrics, Vol. 152, No. 1, pp. 37--45
DOI: 10.1016/j.jeconom.2009.02.004


A discrete or continuous outcome is determined by a structural function in which the effect of some variables of interest is transmitted through a scalar index. Multiple sources of stochastic variation can appear as arguments of the structural function, but not in the index. There may be endogeneity, that is observable and unobservable variables may not be independently distributed. Conditions are provided under which there is local identification of measures of the relative sensitivity of the index to variations in pairs of its possibly endogenous arguments, namely ratios of partial derivatives of the index.

Previous version:
Andrew Chesher December 2005, Identification with excess heterogeneity, cemmap Working Paper

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