Random coefficients on endogenous variables in simultaneous equations models

Matthew Masten

No 25/15, CeMMAP working papers from Institute for Fiscal Studies

Abstract: This paper considers a classical linear simultaneous equations model with random coefficients on the endogenous variables. Simultaneous equations models are used to study social interactions, strategic interactions between firms, and market equilibrium. Random coefficient models allow for heterogeneous marginal effects. I show that random coefficient seemingly unrelated regression models with common regressors are not point identified, which implies random coefficient simultaneous equations models are not point identified. Important features of these models, however, can be identified. For two-equation systems, I give two sets of sufficient conditions for point identification of the coefficients’ marginal distributions conditional on exogenous covariates. The first allows for small support continuous instruments under tail restrictions on the distributions of unobservables which are necessary for point identification. The second requires full support instruments, but allows for nearly arbitrary distributions of unobservables. I discuss how to generalize these results to many equation systems, where I focus on linear-in-means models with heterogeneous endogenous social interaction effects. I give sufficient conditions for point identification of the distributions of these endogenous social effects. I suggest a nonparametric kernel estimator for these distributions based on the identification arguments. I apply my results to the Add Health data to analyze peer effects in education.

Date: 2015-06-15
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cemmap.ac.uk/wp-content/uploads/2020/08/CWP2515.pdf (application/pdf)

Related works:
Journal Article: Random Coefficients on Endogenous Variables in Simultaneous Equations Models (2018)
Working Paper: Random coefficients on endogenous variables in simultaneous equations models (2015)
Working Paper: Random coefficients on endogenous variables in simultaneous equations models (2014)
Working Paper: Random coefficients on endogenous variables in simultaneous equations models (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:azt:cemmap:25/15

DOI: 10.1920/wp.cem.2015.2515

Access Statistics for this paper

More papers in CeMMAP working papers from Institute for Fiscal Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dermot Watson ().