Econometrics HT 18

Chapter 25 : Endogeneity

By Lund University

Cases when the OLS estimator is longer appropriate.

Endogeneity

Throughout the course so far, we have assumed that the explanatory variables are exogenous. This is the most critical assumption in econometrics. In this chapter we will look at cases when explanatory variables cannot be expected to be exogenous (we then say that they are endogenous). We will also look at the consequence of econometric analysis with endogenous variables.

Missing variables

Simultaneous equations

Simultaneous equation bias

Endogenous variables