When is it really justifiable to ignore explanatory variable endogeneity in a regression model?

C-Tier
Journal: Economics Letters
Year: 2016
Volume: 145
Issue: C
Pages: 192-195

Score contribution per author:

1.005 = (α=2.01 / 1 authors) × 0.5x C-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

A procedure that aims to pinpoint the sensitivity of ordinary least-squares based inferences regarding the degree of endogeneity of some regressors has been put forward in Ashley and Parmeter (2015a). Here it is demonstrated that this procedure is based on an incorrect and systematically too optimistic asymptotic approximation to the variance of inconsistent least-squares. Therefore, and because the suggested sensitivity findings pertain to a random set of estimated endogeneity correlations, the claimed significance levels are misleading. For a very basic one coefficient model it is demonstrated why much more sophisticated asymptotic expansions under a stricter set of assumptions are required. This enables to replace some of the flawed earlier sensitivity analysis results for an empirical growth model by asymptotically valid findings.

Technical Details

RePEc Handle
repec:eee:ecolet:v:145:y:2016:i:c:p:192-195
Journal Field
General
Author Count
1
Added to Database
2026-01-25