Linear Estimation of Structural and Causal Effects for Nonseparable Panel Data

Victor Chernozhukov, Ben Deaner, Ying Gao, Jerry Hausman, Whitney K. Newey

arXiv 30 Jul 2026 · Econometrics

arXiv:2607.28291 · PDF · Extracted main text

Abstract

This paper develops linear estimators for structural and causal parameters of nonseparable models using panel data. These models incorporate unobserved, time-varying, individual heterogeneity, which may be correlated with the regressors. Estimation is based on an approximation of a conditional average potential outcome by a linear sieve specification with individual-specific parameters. Effects of interest are estimated by a bias corrected average of individual ridge regressions. We demonstrate how this approach can be applied to estimate causal effects, counterfactual consumer welfare, and averages of individual taxable income elasticities. We show that the proposed estimator has an empirical Bayes interpretation and possesses a number of other useful properties. We formulate Large-$T$ asymptotics that can accommodate discrete regressors and which bypass partial identification in this case. We employ the methods to estimate average equivalent variation and deadweight loss for potential price increases using data on grocery purchases.

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