 Endogeneity (econometrics)

In econometrics, endogeneity broadly refers to situations in which an explanatory variable is correlated with the error term.The distinction between endogenous and exogenous variables originated in simultaneous equations models, where one separates variables whose values are determined by the model from variables which are predetermined; ignoring simultaneity in the estimation leads to biased estimates as it violates the exogeneity assumption of the Gauss–Markov theorem.