A first-stage representation for instrumental variables quantile regression

Javier Alejo, Antonio Galvao and Gabriel Montes-Rojas ()

The Econometrics Journal, 2023, vol. 26, issue 3, 350-377

Abstract: SummaryThis paper develops a first-stage linear regression representation for an instrumental variables (IV) quantile regression (QR) model. The quantile first stage is analogous to the least-squares case, i.e., a linear projection of the endogenous variables on the instruments and other exogenous covariates, with the difference that the QR case is a weighted projection. The weights are given by the conditional density function of the innovation term in the QR structural model, at a given quantile. We also show that the required Jacobian identification conditions for IVQR models are embedded in the quantile first stage. We then suggest procedures to evaluate the validity of instruments by evaluating their statistical significance using the first-stage representation. Monte Carlo experiments provide numerical evidence that the proposed tests work as expected in terms of empirical size and power. An empirical application illustrates the methods.

Keywords: first stage; instrumental variables; quantile regression (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:emjrnl:v:26:y:2023:i:3:p:350-377.

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