Journal
JOURNAL OF ECONOMETRICS
Volume 182, Issue 1, Pages 226-234Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jeconom.2014.04.020
Keywords
Quasi-maximum likelihood; Control function; Linear exponential family; Average structural function; Variable addition test
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I propose a quasi-maximum likelihood framework for estimating nonlinear models with continuous or discrete endogenous explanatory variables. Joint and two-step estimation procedures are considered. The joint procedure is a quasi-limited information maximum likelihood procedure, as one or both of the log likelihoods may be misspecified. The two-step control function approach is computationally simple and leads to straightforward tests of endogeneity. In the case of discrete endogenous explanatory variables, I argue that the control function approach can be applied with generalized residuals to obtain average partial effects. I show how the results apply to nonlinear models for fractional and nonnegative responses. (C) 2014 Elsevier B.V. All rights reserved.
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