Decision Theory Applied to an Instrumental Variables Model

  title={Decision Theory Applied to an Instrumental Variables Model},
  author={Gary E Chamberlain},
This paper applies some general concepts in decision theory to a simple instrumental variables model. There are two endogenous variables linked by a single structural equation; k of the exogenous variables are excluded from this structural equation and provide the instrumental variables (IV). The reduced-form distribution of the endogenous variables conditional on the exogenous variables corresponds to independent draws from a bivariate normal distribution with linear regression functions and a… CONTINUE READING
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