Semiparametric Varying Coefficient Models with Endogenous Covariates

Samuele Centorrino and Jeffrey Racine

Department of Economics Working Papers from McMaster University

Abstract: Though parametric methods are popular in applied settings, practitioners often require nonparametric alternatives.However,fully nonparametric methods are known to suffer from the curse-of-dimensionality, which limits their practical application. Semiparametric methods occupy a middle ground, have the desirable feature that they are both flexible,and provide an attractive alternative to fully nonparametric methods, while attenuating the curse-of-dimensionality.Traditional semiparametric methods, such as the popular 'varying coefficient' specification, do not account for endogenous covariates, which restricts their application. In this paper we consider the estimation of semiparametric varying coefficient models when the functional coefficients may contain (continuous) endogenous covariates thereby extending the reach of this fl exible and powerful class of models.

Pages: 35 pages
Date: 2016-03
New Economics Papers: this item is included in nep-ecm
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Journal Article: Semiparametric Varying Coefficient Models with Endogenous Covariates (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2016-02

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