On January 21, 2020, 14.00, in Sala Consiglio, Prof. Samuele Centorrino (Stony Brook University) will give a talk on “Two-Step Semiparametric Estimation of Correlated Random Coefficient Models” with A. Ullah.
We study control function identification and estimation of the average partial effect in a linear correlated random coefficient model with one continuous endogenous regressor. In some empirical applications, distinct channels generate correlation between regressors and random parameters. In these cases, the slope may directly depend on the endogenous regressors, which entails the failure of standard exclusion restrictions. Upon different exclusion restrictions, and further regularity conditions on the conditional expectation of the slope, we are able to identify the average partial effect using a single control function. We propose a two-step semiparametric sieve estimator and derive its asymptotic properties. We finally apply our methodology to examine the effect of pollution on house prices.