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Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term

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  • Olena Nizalova

    () (Kyiv School of Economics, Kyiv Economic Institute)

  • Irina Murtazashvili

    (University of Pittsburgh)

Abstract

Whether interested in the differential impact of a particular factor in various institutional settings or in the heterogeneous effect of policy or random experiment, the empirical researcher confronts a problem if the factor of interest is correlated with an omitted variable. This paper presents the circumstances under which it is possible to arrive at a consistent estimate of the mentioned effect. We find that if the source of heterogeneity and omitted variable are jointly independent of policy or treatment, then the OLS estimate on the interaction term between the treatment and endogenous factor turns out to be consistent.

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File URL: http://repec.kse.org.ua/pdf/KSE_dp37.pdf
File Function: March 2011
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Bibliographic Info

Paper provided by Kyiv School of Economics in its series Discussion Papers with number 37.

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Date of creation: Mar 2011
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Handle: RePEc:kse:dpaper:37

Note: Submitted to Econometrics Journal
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Keywords: treatment effect; heterogeneity; policy evaluation; random experiments; omitted variable bias;

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  1. Banerjee, Abhijit & Cole, Shawn & Duflo, Esther & Linden, Leigh, 2006. "Remedying Education: Evidence from Two Randomized Experiments in India," CEPR Discussion Papers 5446, C.E.P.R. Discussion Papers.
  2. Leora Friedberg, 1999. "The Labor Supply Effects of the Social Security Earnings Test," NBER Working Papers 7200, National Bureau of Economic Research, Inc.
  3. Sylvie Moulin & Michael Kremer & Paul Glewwe, 2009. "Many Children Left Behind? Textbooks and Test Scores in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 112-35, January.
  4. Blank, Rebecca M, 1991. "The Effects of Double-Blind versus Single-Blind Reviewing: Experimental Evidence from The American Economic Review," American Economic Review, American Economic Association, vol. 81(5), pages 1041-67, December.
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