This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: We assumed that the error is additively separable in the second stage What if we are wrong? Example from Hahn and Ridder y = x 2 u x = z + v u = : 5 v + p 3 2 e each error ( u; v; e ) are iid N (0 ; 1) Average structural function & ( x ) = E u ( y j x ) = 0 yet 2SLS will estimate ^ ± = 0 and ^ ± 1 = 1 Resolve Issue could work with logs (restore separability) Hahn also shows that if we estimate conditional median, no problem arises if u is scalar therefore, if u is symmetric and scalar, then this issue does not arise...
View
Full Document
 Fall '08
 Staff
 Econometrics, Regression Analysis, Supply And Demand, average structural function

Click to edit the document details