Orthogonality conditions for convex regression
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arXiv
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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2025
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| _version_ | 1866918071122264064 |
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| author | Dai, Sheng Kuosmanen, Timo Zhou, Xun |
| author_facet | Dai, Sheng Kuosmanen, Timo Zhou, Xun |
| contents | Econometric identification generally relies on orthogonality conditions, which usually state that the random error term is uncorrelated with the explanatory variables. In convex regression, the orthogonality conditions for identification are unknown. Applying Lagrangian duality theory, we establish the sample orthogonality conditions for convex regression, including additive and multiplicative formulations of the regression model, with and without monotonicity and homogeneity constraints. We then propose a hybrid instrumental variable control function approach to mitigate the impact of potential endogeneity in convex regression. The superiority of the proposed approach is shown in a Monte Carlo study and examined in an empirical application to Chilean manufacturing data. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2506_21110 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Orthogonality conditions for convex regression Dai, Sheng Kuosmanen, Timo Zhou, Xun Methodology Econometrics Econometric identification generally relies on orthogonality conditions, which usually state that the random error term is uncorrelated with the explanatory variables. In convex regression, the orthogonality conditions for identification are unknown. Applying Lagrangian duality theory, we establish the sample orthogonality conditions for convex regression, including additive and multiplicative formulations of the regression model, with and without monotonicity and homogeneity constraints. We then propose a hybrid instrumental variable control function approach to mitigate the impact of potential endogeneity in convex regression. The superiority of the proposed approach is shown in a Monte Carlo study and examined in an empirical application to Chilean manufacturing data. |
| title | Orthogonality conditions for convex regression |
| topic | Methodology Econometrics |
| url | https://arxiv.org/abs/2506.21110 |