Revisiting Gaussian copulas to handle endogenous regressors

Jan-Michael Becker (), Dorian Proksch () and Christian M. Ringle ()
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Jan-Michael Becker: BI Norwegian Business School
Dorian Proksch: Netherlands Institute for Knowledge-Intensive Entrepreneurship (NIKOS), University of Twente
Christian M. Ringle: Hamburg University of Technology

Journal of the Academy of Marketing Science, 2022, vol. 50, issue 1, No 6, 46-66

Abstract: Abstract Marketing researchers are increasingly taking advantage of the instrumental variable (IV)-free Gaussian copula approach. They use this method to identify and correct endogeneity when estimating regression models with non-experimental data. The Gaussian copula approach’s original presentation and performance demonstration via a series of simulation studies focused primarily on regression models without intercept. However, marketing and other disciplines’ researchers mainly use regression models with intercept. This research expands our knowledge of the Gaussian copula approach to regression models with intercept and to multilevel models. The results of our simulation studies reveal a fundamental bias and concerns about statistical power at smaller sample sizes and when the approach’s primary assumptions are not fully met. This key finding opposes the method’s potential advantages and raises concerns about its appropriate use in prior studies. As a remedy, we derive boundary conditions and guidelines that contribute to the Gaussian copula approach’s proper use. Thereby, this research contributes to ensuring the validity of results and conclusions of empirical research applying the Gaussian copula approach.

Keywords: Endogeneity; Gaussian copula; Intercept; Linear regression; Multilevel models; Sample size; Simulation (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (30)

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DOI: 10.1007/s11747-021-00805-y

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