Reduced form

In social science and statistics, particularlly econometrics, a reduced form equation is a method of dealing with endogeneity. A reduced form equation is defined by James Stock & Mark Watson (2007) in the following way:

"It relates the endogenous variable X to all the available exogenous variables, both those included in the regression of interest (W) and the instruments (Z)."

For example, an econometric article by Joeseph Sabia (2007) presents a reduced form equation for adolescents' demand of sexual intercourse as:

SEX = g(p,r,Y,m,a,pe,h,q,z)

where "g" indicates "a function of..." and p...z are exogenous regressors, such as school quality.