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Linear programming-based estimators in simple linear regression

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Author Info

  • Preve, Daniel
  • Medeiros, Marcelo C.

Abstract

In this paper we introduce a linear programming estimator (LPE) for the slope parameter in a constrained linear regression model with a single regressor. The LPE is interesting because it can be superconsistent in the presence of an endogenous regressor and, hence, preferable to the ordinary least squares estimator (LSE). Two different cases are considered as we investigate the statistical properties of the LPE. In the first case, the regressor is assumed to be fixed in repeated samples. In the second, the regressor is stochastic and potentially endogenous. For both cases the strong consistency and exact finite-sample distribution of the LPE is established. Conditions under which the LPE is consistent in the presence of serially correlated, heteroskedastic errors are also given. Finally, we describe how the LPE can be extended to the case with multiple regressors and conjecture that the extended estimator is consistent under conditions analogous to the ones given herein. Finite-sample properties of the LPE and extended LPE in comparison to the LSE and instrumental variable estimator (IVE) are investigated in a simulation study. One advantage of the LPE is that it does not require an instrument.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304407611001035
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 165 (2011)
Issue (Month): 1 ()
Pages: 128-136

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Handle: RePEc:eee:econom:v:165:y:2011:i:1:p:128-136

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Web page: http://www.elsevier.com/locate/jeconom

Related research

Keywords: Linear regression; Endogeneity; Linear programming estimator; Quasi-maximum likelihood estimator; Exact distribution;

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Cited by:
  1. Naoto Kunitomo & Michael McAleer & Yoshihiko Nishiyama, 2010. "Moment Restriction-based Econometric Methods: An Overview," Working Papers in Economics 10/65, University of Canterbury, Department of Economics and Finance.

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