Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232760 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 14008
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We study the informational content of factor structures in discrete triangular systems. Factor structures have been employed in a variety of settings in cross sectional and panel data models, and in this paper we formally quantify their identifying power in a bivariate system often employed in the treatment effects literature. Our main findings are that imposing a factor structure yields point identification of parameters of interest, such as the coefficient associated with the endogenous regressor in the outcome equation, under weaker assumptions than usually required in these models. In particular, we show that a "non-standard" exclusion restriction that requires an explanatory variable in the outcome equation to be excluded from the treatment equation is no longer necessary for identification, even in cases where all of the regressors from the outcome equation are discrete. We also establish identification of the coefficient of the endogenous regressor in models with more general factor structures, in situations where one has access to at least two continuous measurements of the common factor.
Subjects: 
factor structures
discrete choice
causal effects
JEL: 
C14
C31
C35
Document Type: 
Working Paper

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