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The reduced-form equations describe the (equilibrium) impact after allowing for all interactions between the endogenous variables to work themselves out.
To that end, we wish to highlight and elaborate on three areas of our results: the relationships between the exogenous variables, the relationships between the endogenous variables, and the relationships between the two sets.
We modelled the direct effects between the endogenous variables as shown in Figure 1.
The direct effects between the endogenous variables were specified in accordance with the theoretical ASE model in Figure 1.
We adjusted the direct effect between the endogenous variables in the model in order to obtain good fit parameters.
The relationships in the start model between the endogenous variables (beta and psi matrix) are presented in Figure 2, together with the model fit parameters.
Similar(50)
The correlation between the endogenous variable and the instrument is strong enough for all four race-gender groups.
This problem may yield biased estimates and will be exacerbated by a weak correlation between the endogenous variable and the instruments (Bound et al. 1995).
This condition corresponds to the instrument relevance assumption in the empirical section, which assures a sufficient correlation between the endogenous variable, i.e., wage cuts, and the instrumental variable, i.e., the status of a performance-based payment system.
The random error terms ε and ξ affect both h and d (which is made clear by rewriting (13) in terms of h), suggesting a correlation between each of the endogenous variables and each of the random error terms.
If the absolute kurtosis value of skewness and kurtosis is between +2 and −2, the endogenous variables normality is acceptable [10, 59].
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