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Covariate measurement and endogeneity

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  • Millimet, Daniel L.

Abstract

The effects of improving covariate measurement are investigated when the covariate is endogenous even in the absence of measurement error. Reducing measurement error can exacerbate the finite sample bias of Two-Stage Least Squares. An application reveals this is of practical importance.

Suggested Citation

  • Millimet, Daniel L., 2015. "Covariate measurement and endogeneity," Economics Letters, Elsevier, vol. 136(C), pages 59-63.
  • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:59-63
    DOI: 10.1016/j.econlet.2015.08.023
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    References listed on IDEAS

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    1. Arik Levinson, 2001. "An Industry-Adjusted Index of State Environmental Compliance Costs," NBER Chapters,in: Behavioral and Distributional Effects of Environmental Policy, pages 131-158 National Bureau of Economic Research, Inc.
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    3. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    4. Hahn, Jinyong & Hausman, Jerry, 2002. "Notes on bias in estimators for simultaneous equation models," Economics Letters, Elsevier, vol. 75(2), pages 237-241, April.
    5. Caspar Sauter, 2014. "How should we measure environmental policy stringency? A new approach," IRENE Working Papers 14-01, IRENE Institute of Economic Research.
    6. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-1173, December.
    7. Caspar Sauter, 2014. "Online Appendix: How should we measure environmental policy stringency? A new approach," IRENE Working Papers 14-02, IRENE Institute of Economic Research.
    8. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 979-1014.
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    Cited by:

    1. repec:eee:econom:v:199:y:2017:i:2:p:141-155 is not listed on IDEAS
    2. McDonough, Ian K. & Millimet, Daniel L., 2017. "Missing data, imputation, and endogeneity," Journal of Econometrics, Elsevier, vol. 199(2), pages 141-155.

    More about this item

    Keywords

    Measurement error; Endogeneity; Two-Stage Least Squares;

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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