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Varying Coefficient Models Revisited: An Econometric View

  • Giacomo BeniniEmail author
  • Stefan Sperlich
  • Raoul Theler
Conference paper
Part of the Springer Proceedings in Mathematics & Statistics book series (PROMS, volume 175)

Abstract

Disaggregated data are characterized by a high degree of diversity. Nonparametric models are often flexible enough to capture it but they are hardly interpretable. A semiparametric specification that models heterogeneity directly creates the preconditions to identify causal links. Certainly, the presence of endogenous variables can destroy the ability of the model to distinguish correlation from causality. Triangular varying coefficient models that consider the returns as nonrandom functions, and at the same time exogeneize the problematic regressors are able to add to the flexibility of a semiparametric specification the causal interpretability. Moreover, they make the necessary assumptions much more credible than they typically are in the standard linear models.

Keywords

Heterogeneity Varying Coefficient Endogeneity 

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Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Geneva School for Economics and ManagementUniversité de GenéveGenevaSwitzerland

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