Endogeneity bias modeling using observables

•This paper proposes an alternative solution to the endogeneity problem.•Endogeneity bias is modeled as a function of additional observables.•Identification of the parameters of interest is provided.•We propose an estimator and show its consistency and asymptotic normality.

This paper proposes an alternative solution to the endogeneity problem by explicitly modeling the joint interaction of the endogenous variables and the unobserved causes of the dependent variable as a function of additional observables. We derive identification of the parameters, develop an estimator, and establish its consistency and asymptotic normality.