Bayesian endogeneity bias modeling

- Model for endogeneity bias using a prior distribution for endogenous regressors.
- Method-of-moments and Ridge penalized shrinkage regression estimator.
- Based on imposing a prior on the moment conditions for the endogenous regressors.
- Shrinkage of the endogenous regressor coefficients only.
- We show the estimator's comparison with a Bayesian estimator.

We propose to model endogeneity bias using prior distributions of moment conditions. The estimator can be obtained both as a method-of-moments estimator and in a Ridge penalized regression framework. We show the estimator's relation to a Bayesian estimator.