Page 38 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.81, # 2, 2024, pp. 30-59

Given that:
X = (m 2 d AP 1 /( ) − m 2 m 1 )
AP
X W E = (d W E ) /( 1 m− 2 m 1 )

 = (m  + 1 /( ) − m m )
3 2 1 2 2 1

Equation (5) expresses women empowerment in terms of the vector of exogenous
X X
variables AP and W E and the error terms, which is the reduced form equation for
 
women empowerment. Also the vectors of parameters 1 and 2 are reduced form
parameters which are nonlinear functions of the structural parameters in equation (1) and

equation (2). The reduced form error, 3 is a linear function of the structural error terms;
 1 and  2 . Since  1 and  2 are each uncorrelated with  1 and   3 is also
,
2
 
uncorrelated with 1 and 2 . Thus, the vectors of parameters X AP and X W E can be

consistently estimated by the OLS this is input in to 2SLS estimation.

Following Wooldridge (1997) to account for potential endogeneity and heterogeneity
of responses of unobservable that are complementary with women empowerment,
equation (1) can be augmented to equation (6) which is the control function model:

AP = 0 + d + WE i +  ˆ 3  + (6)
1
1
1
ˆ 

Here 3 is fitted residual of climate change derived from equation (5) while is the error
 
term, , 1 1 are parameters to be estimated. In addition, the IV (instrumental variable)
estimates of equation (6) are unbiased and consistent only when: (a) the expected value
of the interaction between women empowerment and its residual is zero or the interaction
between women empowerment and its fitted residual is linear and (b) there is no sample
selection problem. If the correlation is non-linear, the control function approach is
required to purge the estimated coefficients of the effects of unobservable variables.

The potential endogenous instrument is cluster cost of medical consultation, while the
exogenous variables to be used in the study include: household size, primary
agricultural activity, socio-economic status, size of production farm, marital status,
access to credit, access to agricultural financing, use of modern agricultural
equipment, use of fertilizers, use of specialized seeds, cost of seeds, cost of fertilizers,
formal agricultural training and location of household.

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