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

  • Olena Nizalova

    ()

    (University of Kent, Kyiv School of Economics)

  • Irina Murtazashvili

    ()

    (Drexel Universit)

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: Revised version, June 2014
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Paper provided by Kyiv School of Economics in its series Discussion Papers with number 37.

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Date of creation: Mar 2011
Date of revision:
Handle: RePEc:kse:dpaper:37
Note: Revised and resubmitted to the Journal of Econometric Methods
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  1. Abhijit Banerjee & Shawn Cole & Esther Duflo & Leigh Linden, 2005. "Remedying Education: Evidence from Two Randomized Experiments in India," NBER Working Papers 11904, National Bureau of Economic Research, Inc.
  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. 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.
  4. 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.
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