Control function (econometrics): Difference between revisions
no edit summary
'''Control functions''' are statistical methods to correct for [[endogeneity (econometrics)|endogeneity]] problems by modelling the endogeneity in the [[errors and residuals|error term]]. The approach thereby differs in important ways from other models that try to account for the same [[econometric]] problem. [[Instrumental variable]]s, for example, attempt to model the endogenous variable ''X'' as an often [[invertible]] model with respect to a relevant and [[exogenous]] instrument ''Z''. [[Panel data]] use special data properties to difference out unobserved heterogeneity that is assumed to be fixed over time.
Control functions were introduced by Heckman and Robb,<ref>Heckman
The original Heckit procedure makes [[distributional assumption]]s about the error terms, however, more flexible estimation approaches with weaker distributional assumptions have been established.<ref>Matzkin