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Identification of a Triangular Two Equation System Without Instruments

Author

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  • Arthur Lewbel
  • Susanne M. Schennach
  • Linqi Zhang

Abstract

We show that a standard linear triangular two equation system can be point identified, without the use of instruments or any other side information. We find that the only case where the model is not point identified is when a latent variable that causes endogeneity is normally distributed. In this nonidentified case, we derive the sharp identified set. We apply our results to Acemoglu and Johnson’s model of life expectancy and GDP, obtaining point identification and comparable estimates to theirs, without using their (or any other) instrument.

Suggested Citation

  • Arthur Lewbel & Susanne M. Schennach & Linqi Zhang, 2024. "Identification of a Triangular Two Equation System Without Instruments," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 42(1), pages 14-25, January.
    • Handle: RePEc:taf:jnlbes:v:42:y:2024:i:1:p:14-25
    DOI: 10.1080/07350015.2023.2166052
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    Cited by:

    1. Geert Mesters & Piotr Zwiernik, 2022. "Non-independent components analysis," Economics Working Papers 1845, Department of Economics and Business, Universitat Pompeu Fabra.

    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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