Informational Content of Factor Structures in Simultaneous Binary Response Models

Shakeeb Khan, Arnaud Maurel and Yichong Zhang

A chapter in Essays in Honor of Joon Y. Park: Econometric Methodology in Empirical Applications, 2023, vol. 45B, pp 385-410 from Emerald Group Publishing Limited

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 chapter 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: Factor structures; discrete choice; causal effects; identification; binary dependent variable; endogeneity; C14; C31; C35 (search for similar items in EconPapers)
Date: 2023
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Related works:
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 (2020)
Working Paper: Informational Content of Factor Structures in Simultaneous Binary Response Models (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-90532023000045b016

DOI: 10.1108/S0731-90532023000045B016

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