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

  • Nizalova, Olena Y.


    (University of Kent)

  • Murtazashvili, Irina


    (Drexel University)

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 considers circumstances under which the estimate of the mentioned effect is consistent. 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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6282.

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Length: 12 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6282
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  1. Leora Friedberg, 2000. "The Labor Supply Effects of the Social Security Earnings Test," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 48-63, February.
  2. 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.
  3. repec:oup:qjecon:v:122:y:2007:i:3:p:1235-1264 is not listed on IDEAS
  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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