Endogeneity, time-varying coefficients, and incorrect vs. correct ways of specifying the error terms of econometric models

Artikel

Using the net effect of all relevant regressors omitted from a model to form its error term is incorrect because the coefficients and error term of such a model are non-unique. Non-unique coefficients cannot possess consistent estimators. Uniqueness can be achieved if; instead; one uses certain 'sufficient sets' of (relevant) regressors omitted from each model to represent the error term. In this case; the unique coefficient on any non-constant regressor takes the form of the sum of a bias-free component and omitted-regressor biases. Measurement-error bias can also be incorporated into this sum. We show that if our procedures are followed; accurate estimation of bias-free components is possible.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Econometrics ; ISSN: 2225-1146 ; Volume: 5 ; Year: 2017 ; Issue: 1 ; Pages: 1-17 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft ; Estimation: General ; Model Construction and Estimation
• Subject: endogenous variable ; exogenous variable ; time-varying coefficient ; unique coefficient and error term ; accurate estimation of bias-free component

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Swamy, P. A. V. B. ; Mehta, Jatinder S. ; Chang, I-Lok
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2017

Further information

• DOI: doi:10.3390/econometrics5010008
• Handle: http://hdl.handle.net/10419/171908
• Last update: 10.03.2025, 11:43 AM CET