Working Paper

ivcrc: An Instrumental Variables Estimator for the Correlated Random Coefficients Model


Abstract: We present the ivcrc command, which implements an instrumental variables (IV) estimator for the linear correlated random coefficients (CRC) model. This model is a natural generalization of the standard linear IV model that allows for endogenous, multivalued treatments and unobserved heterogeneity in treatment effects. The proposed estimator uses recent semiparametric identification results that allow for flexible functional forms and permit instruments that may be binary, discrete, or continuous. The command also allows for the estimation of varying coefficients regressions, which are closely related in structure to the proposed IV estimator. We illustrate this IV estimator and the ivcrc command by estimating the returns to education in the National Longitudinal Survey of Young Men.

Keywords: ivregress; Instrumental variables; Correlated random coefficients; Heterogeneous treatment effects; Varying coefficient models; Returns to schooling;

JEL Classification: C14; C51; I26; C26;

https://doi.org/10.17016/FEDS.2020.046

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2020-06-16

Number: 2020-046

Pages: 26