A discrete or continuous outcome is determined by a structural function in which the effect of some variables of interest is transmitted through a scalar index. Multiple sources of stochastic variation can appear as arguments of the structural function, but not in the index. There may be endogeneity, that is observable and unobservable variables may not be independently distributed. Conditions are provided under which there is local identification of measures of the relative sensitivity of the index to variations in pairs of its possibly endogenous arguments, namely ratios of partial derivatives of the index.
Authors
Research Fellow University College London
Andrew is the Director of the ESRC Centre for Microdata Methods and Practice (cemmap) and Professor of Economics and Economic Measurement at UCL.
Journal article details
- DOI
- 10.1016/j.jeconom.2009.02.004
- Publisher
- Elsevier
- Issue
- Volume 152, Issue 1, September 2009
Suggested citation
Chesher, A. (2009). 'Excess heterogeneity, endogeneity and index restrictions' 152(1/2009)
More from IFS
Understand this issue
What are the challenges in getting debt on a falling path?
28 June 2024
Election Special: Your questions answered
27 June 2024
What is the two-child limit in benefits?
27 June 2024
Policy analysis
How would the parties’ tax and spending plans affect Scotland and Wales?
28 June 2024
Free breakfast clubs in schools: what Labour’s plans would mean for pupils and families
25 June 2024
What are the parties’ plans for benefits and taxes?
24 June 2024
Academic research
Fiscal Studies: Volume 45, Issue 2
28 June 2024
Income inequality in Ireland, 1987–2019
28 June 2024
Inequality in Denmark, 1987–2021
28 June 2024