Partial Distributional Policy Effects Under Endogeneity

Badi H Baltagi, Pallab K. Ghosh

Research output: Contribution to journalArticle

Abstract

Rothe (Econometrica 80, 2269–2301 2012) introduces a new class of parameters called ‘Partial Distributional Policy Effects’ (PPE) to estimate the impact on the marginal distribution of an outcome variable due to a change in the unconditional distribution of a single covariate. Since the strict exogeneity assumption of all covariates makes this approach less applicable in empirical research, we propose the identification of the PPEs for a continuous endogenous explanatory variable using the control variable approach developed by Imbens and Newey (Econometrica 77, 1481–1512 2009). We also apply this proposed control variable PPE approach to investigate how poverty and black-white racial wage gaps contribute to the steep increase in the incarceration rate of black men over the period 1980-2010. Our control variable PPE estimates suggest that although the fall in the racial wage gap does not explain the changes in the incarceration rate of black men, changes in the poverty rate contribute about one-third of the steep increase in the incarceration rate at the upper-tail of the distribution.

Original languageEnglish (US)
JournalSankhya B
DOIs
StatePublished - Jan 1 2019

Fingerprint

Endogeneity
Wages
Partial
Poverty
Covariates
Empirical Research
Marginal Distribution
Estimate
Tail
Policy
Incarceration
Control variable
Wage gap

Keywords

  • Distribution regression
  • Partial distributional policy effects
  • Primary 62
  • Quantile regression
  • Secondary 60
  • Wage inequality

ASJC Scopus subject areas

  • Statistics and Probability
  • Statistics, Probability and Uncertainty
  • Applied Mathematics

Cite this

Partial Distributional Policy Effects Under Endogeneity. / Baltagi, Badi H; Ghosh, Pallab K.

In: Sankhya B, 01.01.2019.

Research output: Contribution to journalArticle

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