The validity of instruments revisited
AbstractThis paper shows how valid inferences can be made when an instrumental variable does not perfectly satisfy the orthogonality condition. When there is a mild violation of the orthogonality condition, the Anderson and Rubin (1949) test is oversized. In order to correct this problem, the fractionally resampled Anderson–Rubin test is derived by modifying Wu’s (1990) resampling technique. We select half of the sample when resampling and obtain valid but conservative critical values. Simulations show that our technique performs well even with moderate to large violation of exogeneity when there is a finite sample correction for the block size choice.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 166 (2012)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jeconom
Berry–Esseen bound; Finite sample of random variables; Near-exogeneity;
Find related papers by JEL classification:
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hall, Alastair R. & Inoue, Atsushi, 2003.
"The large sample behaviour of the generalized method of moments estimator in misspecified models,"
Journal of Econometrics,
Elsevier, vol. 114(2), pages 361-394, June.
- Alastair R. Hall & Atsushi Inoue, 2005. "The Large Sample Behaviour of the Generalized Method of Moments Estimator in Misspecified Models," Econometrics 0505002, EconWPA.
- Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005.
"Income and Democracy,"
CEPR Discussion Papers
5273, C.E.P.R. Discussion Papers.
- Daniel Berkowitz & Mehmet Caner & Ying Fang, 2006.
"Are "Nearly Exogenous" Instruments Reliable?,"
219, University of Pittsburgh, Department of Economics, revised Jan 2006.
- Frank Kleibergen, 2002.
"Pivotal Statistics for Testing Structural Parameters in Instrumental Variables Regression,"
Econometric Society, vol. 70(5), pages 1781-1803, September.
- Frank Kleibergen, 2000. "Pivotal Statistics for Testing Structural Parameters in Instrumental Variables Regression," Tinbergen Institute Discussion Papers 00-055/4, Tinbergen Institute.
- Andrews, Donald W.K. & Guggenberger, Patrik, 2009.
"Validity Of Subsampling And “Plug-In Asymptotic” Inference For Parameters Defined By Moment Inequalities,"
Cambridge University Press, vol. 25(03), pages 669-709, June.
- Donald W.K. Andrews & Patrik Guggenberger, 2007. "Validity of Subsampling and "Plug-in Asymptotic" Inference for Parameters Defined by Moment Inequalities," Cowles Foundation Discussion Papers 1620, Cowles Foundation for Research in Economics, Yale University.
- K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
- Patrik Buggenberger & Richard Smith, 2003.
"Generalized empirical likelihood estimators and tests under partial, weak and strong identification,"
CeMMAP working papers
CWP08/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Guggenberger, Patrik & Smith, Richard J., 2005. "Generalized Empirical Likelihood Estimators And Tests Under Partial, Weak, And Strong Identification," Econometric Theory, Cambridge University Press, vol. 21(04), pages 667-709, August.
- James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September.
- Andrews, Donald W.K. & Guggenberger, Patrik, 2010. "ASYMPTOTIC SIZE AND A PROBLEM WITH SUBSAMPLING AND WITH THE m OUT OF n BOOTSTRAP," Econometric Theory, Cambridge University Press, vol. 26(02), pages 426-468, April.
- Caner, Mehmet & Sandler Morrill, Melinda, 2009.
"A New Paradigm: A Joint Test of Structural and Correlation Parameters in Instrumental Variables Regression When Perfect Exogeneity is Violated,"
17689, University Library of Munich, Germany.
- Caner, Mehmet & Morrill, Melinda, 2009. "A New Paradigm: A Joint Test of Structural and Correlation Parameters in Instrumental Variables Regression When Perfect Exogeneity is Violated," MPRA Paper 16790, University Library of Munich, Germany.
- Mark L. Hoekstra & Dan Berkowitz, 2008. "Do Elite Private High Schools Improve College Placement? Evidence from Admission Data," Working Papers 364, University of Pittsburgh, Department of Economics, revised Aug 2008.
- Bertocchi, Graziella & Dimico, Arcangelo, 2012. "The racial gap in education and the legacy of slavery," Journal of Comparative Economics, Elsevier, vol. 40(4), pages 581-595.
- Xu Cheng & Zhipeng Liao, 2012. "Select the Valid and Relevant Moments: A One-Step Procedure for GMM with Many Moments," PIER Working Paper Archive 12-045, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.