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Intersection Bounds: Estimation and Inference

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  • Victor Chernozhukov
  • Sokbae Lee
  • Adam M. Rosen

Abstract

We develop a practical and novel method for inference on intersection bounds, namely bounds defined by either the infimum or supremum of a parametric or nonparametric function, or equivalently, the value of a linear programming problem with a potentially infinite constraint set. Our approach is especially convenient for models comprised of a continuum of inequalities that are separable in parameters, and also applies to models with inequalities that are non-separable in parameters. Since analog estimators for intersection bounds can be severely biased in finite samples, routinely underestimating the size of the identified set, we also offer a median-bias-corrected estimator of such bounds as a natural by-product of our inferential procedures. We develop theory for large sample inference based on the strong approximation of a sequence of series or kernel-based empirical processes by a sequence of "penultimate" Gaussian processes. These penultimate processes are generally not weakly convergent, and thus non-Donsker. Our theoretical results establish that we can nonetheless perform asymptotically valid inference based on these processes. Our construction also provides new adaptive inequality/moment selection methods. We provide conditions for the use of nonparametric kernel and series estimators, including a novel result that establishes strong approximation for any general series estimator admitting linearization, which may be of independent interest.

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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 81 (2013)
Issue (Month): 2 (03)
Pages: 667-737

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Handle: RePEc:ecm:emetrp:v:81:y:2013:i:2:p:667-737

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