IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Parametric and Nonparametric Regression in the Presence of Endogenous Control Variables

Listed author(s):
  • Markus Frölich

The aim of this paper is to convey to a wider audience of applied statisticians that "nonparametric" (matching) estimation methods can be a very convenient tool to overcome problems with "endogenous" control variables. In empirical research one is often interested in the causal effect of a variable "X" on some outcome variable "Y". With observational data, i.e. in the absence of random assignment, the correlation between "X" and "Y" generally does not reflect the treatment effect but is confounded by differences in observed and unobserved characteristics. Econometricians often use two different approaches to overcome this problem of confounding by other characteristics. First, controlling for observed characteristics, often referred to as selection on observables, or instrumental variables regression, usually with additional control variables. Instrumental variables estimation is probably the most important estimator in applied work. In many applications, these control variables are themselves correlated with the error term, making ordinary least squares and two-stage least squares inconsistent. The usual solution is to search for additional instrumental variables for these endogenous control variables, which is often difficult. We argue that nonparametric methods help to reduce the number of instruments needed. In fact, we need only one instrument whereas with conventional approaches one may need two, three or even more instruments for consistency. Nonparametric matching estimators permit consistent estimation without the need for (additional) instrumental variables and permit arbitrary functional forms and treatment effect heterogeneity. Copyright (c) 2008 The Author. Journal compilation (c) 2008 International Statistical Institute.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by International Statistical Institute in its journal International Statistical Review.

Volume (Year): 76 (2008)
Issue (Month): 2 (August)
Pages: 214-227

in new window

Handle: RePEc:bla:istatr:v:76:y:2008:i:2:p:214-227
Contact details of provider: Postal:
P.O. Box 24070, 2490 AB The Hague

Phone: 31-70-3375737
Fax: 31-70-3860025
Web page:

More information through EDIRC

Order Information: Web:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bla:istatr:v:76:y:2008:i:2:p:214-227. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.