Objective. To investigate potential bias in the use of the conventional linear instrumental variables (IV) method for the estimation of causal effects in inherently nonlinear regression settings.
Data Sources. Smoking Supplement to the 1979 National Health Interview Survey, National Longitudinal Alcohol Epidemiologic Survey, and simulated data.
Study Design. Potential bias from the use of the linear IV method in nonlinear models is assessed via simulation studies and real world data analyses in two commonly encountered regression setting: (1) models with a nonnegative outcome (e.g., a count) and a continuous endogenous regressor; and (2) models with a binary outcome and a binary ...
<[infinity]). Equation (1) is a variant of the inverse of the flexible form suggested by Box and Cox (1964). The IBC conditional mean regression specification was first suggested by Wooldridge (1992) and later implemented by Kenkel and Terza (2001) and Basu and Rathouz (2005). The IBC functional form approaches the exponential model as [gamma] [right arrow] 0. When [gamma]=2 and [x.sub.p][[beta].sub.p] + [x.sub.o][[beta].sub.o] + [x.sub.u][[beta].sub.u]><.16 or>