Methods for Using Selection on Observed Variables to Address Selection on Unobserved Variables
Todd E. Elder, Timothy G. Conley, Christopher R. Taber, Joseph G. Altonji · RePEc: Research Papers in Economics · 2009
In this paper we develop new estimation methods for identifying causal effects based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables. Our approach involves the use of factor model as a way to infer properties of unobserved covariates from the observed covariates. We propose a confidence interval estimator that covers the true value of the causal effect.