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Testing Subsets of Structural Parameters in the Instrumental Variables

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  • Frank Kleibergen

    (Brown University and University of Amsterdam)

Abstract

We develop Lagrange multiplier and likelihood ratio statistics to test hypotheses on subsets of the structural parameters in an instrumental variables regression model. The asymptotic distributions of these statistics are robust to instrument quality. A key assumption is, however, that the instruments are valid for the remaining endogenous variables. We show that the statistics lead to 95% confidence sets for the return on education in data from Card (1995) that are considerably different from the confidence sets that result from the 2SLS Wald statistic, which is the common statistic used in the literature. © 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 86 (2004)
Issue (Month): 1 (February)
Pages: 418-423

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Handle: RePEc:tpr:restat:v:86:y:2004:i:1:p:418-423

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Cited by:
  1. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(4), pages 111-132, Fall.
  2. Patrik Guggenberger & Richard Smith, 2005. "Generalized empirical likelihood tests in time series models with potential identification failure," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP01/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Angelica Gonzalez, 2007. "Empirical Likelihood Estimation in Dynamic Panel Models," ESE Discussion Papers, Edinburgh School of Economics, University of Edinburgh 168, Edinburgh School of Economics, University of Edinburgh.
  4. Mikusheva, Anna, 2013. "Survey on statistical inferences in weakly-identified instrumental variable models," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 29(1), pages 117-131.
  5. Ludwig, Markus & Flückiger, Matthias, 2014. "Economic Shocks in the Fisheries Sector and Maritime Piracy," MPRA Paper 56959, University Library of Munich, Germany.

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