Asymptotic collinearity is not quite an identification failure, but it can absolutely cause inconsistency! We prove it often makes OLS inconsistent. Simulations show that it also breaks QMLE and 2SLS/IV estimators

Why hasn't previous work come across this problem? Most theory work has simply assumed asymptotic colinearity doesn't occur. But it absolutely does in many models! My takeaway: don't use the linear-in-means model