We analyze a class of linear regression models including interactions of endogenous regressors and exogenous covariates. We show how to generate instrumental variables using the nonlinear functiona...

/pdf/ols-and-iv-estimation-of-regression-models-including-2xlveoppp5.pdf

OLS and IV estimation of regression models including endogenous interaction terms

https://www.econstor.eu/bitstream/10419/113760/1/cesifo_wp5439.pdf

Aid on Demand: African Leaders and the Geography of China's Foreign Assistance

This paper introduces a new dataset of official financing — including foreign aid and other forms of concessional and non-concessional state financing — from China to 138 countries between 2000 and 2014. We use these data to investigate whether and to what extent Chinese aid affects economic growth in recipient countries. To account for the endogeneity of aid, we employ an instrumental-variables strategy that relies on exogenous variation in the supply of Chinese aid over time resulting from changes in Chinese steel production. Variation across recipient countries results from a country’s probability of receiving aid. Controlling for year- and recipient-fixed effects that capture the levels of these variables, their interaction provides a powerful and excludable instrument. Our results show that Chinese official development assistance (ODA) boosts economic growth in recipient countries. For the average recipient country, we estimate that one additional Chinese ODA project produces a 0.7 percentage point increase in economic growth two years after the project is committed. We also benchmark the effectiveness of Chinese aid vis-a-vis the World Bank, the United States, and all members of the OECD’s Development Assistance Committee (DAC). Our results indicate that Chinese, U.S., and OECD-DAC ODA have positive effects on economic growth, but we find no robust evidence that World Bank aid promotes growth. We also find that, irrespective of the funding source, less concessional and more commercially-oriented types of official finance do not boost economic growth. Finally, we test the popular claim that significant financial support from China impairs the effectiveness of grants and loans from Western donors and lenders. Our results do not support this claim.

Aid, China, and Growth: Evidence from a New Global Development Finance Dataset

Regulation and political opposition often force water utilities to rely on nonprice approaches to manage water demand. Using randomized field experiments in three different water utilities, we assess the effectiveness of social comparisons to reduce demand and analyze their interaction with existing conservation programs. In two utilities, the program decreases consumption by 5%, with significant heterogeneity across the distribution of baseline water use. We do not detect a statistically significant average treatment effect in the third utility. Social norms do not appear to crowd out existing conservation programs: treated households are more likely to participate in additional programs. Of the two utilities with significant treatment effects, higher participation rates in conservation programs account for a very small fraction of water savings (3%) in one utility and a modest fraction (9%–25%) in the second. We discuss evidence that social norms may induce participation among the specific type ...

Social Comparisons, Household Water Use, and Participation in Utility Conservation Programs: Evidence from Three Randomized Trials

We use an excludable instrument to test the effect of foreign aid on economic growth in a sample of 96 recipient countries over the 1974-2009 period. We interact donor government fractionalization with a recipient country’s probability of receiving aid. The results show that fractionalization increases donors’ aid budgets, representing the over-time variation of our instrument, while the probability of receiving aid introduces variation across recipient countries. Controlling for country- and period-specific effects that capture the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Making use of the instrument, our results show no significant effect of aid on growth in the overall sample. We also investigate the effect of aid on consumption, savings, and investments, and split the sample according to the quality of economic policy, democracy, and the Cold War period. With the exception of the post-Cold War period (where abundant aid reduces growth), we find no significant effect of aid on growth in any of these sub-samples. None of the other outcomes are affected by aid.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/caje.12455

Aid and growth: New evidence using an excludable instrument

Whether interested in the differential impact of a particular factor in various institutional settings or in the heterogeneous effect of policy or random experiment, the empirical researcher confronts a problem if the factor of interest is correlated with an omitted variable. This paper considers circumstances under which the estimate of the mentioned effect is consistent. We find that if the source of heterogeneity and omitted variable are jointly independent of policy or treatment, then the OLS estimate on the interaction term between the treatment and endogenous factor turns out to be consistent.

Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term

Whether interested in the differential impact of a particular factor in various institutional settings or in the heterogeneous effect of policy or random experiment, the empirical researcher confronts a problem if the factor of interest is correlated with an omitted variable. This paper presents the circumstances under which it is possible to arrive at a consistent estimate of the mentioned effect. We find that if the source of heterogeneity and omitted variable are jointly independent of policy or treatment, then the OLS estimate on the interaction term between the treatment and endogenous factor turns out to be consistent.

/pdf/exogenous-treatment-and-endogenous-factors-vanishing-of-3nnva63pbg.pdf

Irina Murtazashvili

Papers

Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term

Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term

Exogenous Treatment and Endogenous Factors: Vanishing of Omitted Variable Bias on the Interaction Term