Simulation-Based Two-Step Estimation with Endogenous Regressors

Kamhon Kan () and Chihwa Kao

No 76, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: This paper considers models with latent/discrete endogenous regressors and presents a simulation-based two-step (STS) estimator. The endogeneity is corrected by adopting a simulation-based control function approacy. The first step consists of simulating the residuals of the reduced-form equation for endogenous regressors. The second step is a regression model (linear, latent or discrete) with the simulated residual as an additional regressor. In this paper we develop the asymptotic theory for the STS estimator and its rate of convergence.

Keywords: simulation-based; two-step; (STS); estimator (search for similar items in EconPapers)
JEL-codes: C13 C15 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2005-12
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:76

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