cemmap working paper, Centre for Microdata Methods and Practice CWP34/12
In this paper we study a random coefficient model for a binary outcome. We allow for the possibility that some or even all of the regressors are arbitrarily correlated with the random coefficients, thus permitting endogeneity. We assume the existence of observed instrumental variables Z that are jointly independent with the random coefficients, although we place no structure on the joint determination of the endogenous variable X and instruments Z, as would be required for a control function approach. The model fits within the spectrum of generalized instrumental variable models studied in Chesher and Rosen (2012a), and we thus apply identification results from that and related studies to the present context, demonstrating their use. Specifically, we characterize the identi.ed set for the distribution of random coefficients in the binary response model with endogeneity via a collection of conditional moment inequalities, and we investigate the structure of these sets by way of numerical illustration.
random coefficients instrumental variables endogeneity incomplete models set identification partial identification random sets