Informational Content of Factor Structures in Simultaneous Binary Response Models

Shakeeb Khan, Arnaud Maurel and Yichong Zhang ()
Additional contact information
Shakeeb Khan: Boston College
Yichong Zhang: Singapore Management University

No 14008, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the informational content of factor structures in discrete triangular systems. Factor structures have been employed in a variety of settings in cross sectional and panel data models, and in this paper we formally quantify their identifying power in a bivariate system often employed in the treatment effects literature. Our main findings are that imposing a factor structure yields point identification of parameters of interest, such as the coefficient associated with the endogenous regressor in the outcome equation, under weaker assumptions than usually required in these models. In particular, we show that a "non-standard" exclusion restriction that requires an explanatory variable in the outcome equation to be excluded from the treatment equation is no longer necessary for identification, even in cases where all of the regressors from the outcome equation are discrete. We also establish identification of the coefficient of the endogenous regressor in models with more general factor structures, in situations where one has access to at least two continuous measurements of the common factor.

Keywords: discrete choice; factor structures; causal effects (search for similar items in EconPapers)
JEL-codes: C14 C31 C35 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2020-12
New Economics Papers: this item is included in nep-dcm and nep-sea
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Published - published in: Chang, Y., Lee, S. and Miller, J.I. (Eds.) Essays in Honor of Joon Y. Park: Econometric Methodology in Empirical Applications (Advances in Econometrics, Vol. 45B), Emerald Publishing Limited, Bingley, 2023, 385-410

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Related works:
Chapter: Informational Content of Factor Structures in Simultaneous Binary Response Models (2023)
Working Paper: Informational Content of Factor Structures in Simultaneous Binary Response Models (2022)
Working Paper: Informational Content of Factor Structures in Simultaneous Binary Response Models (2021)
Working Paper: Informational Content of Factor Structures in Simultaneous Binary Response Models (2019)
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