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Inference in limited dependent variable models robust to weak identification

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  • Leandro M. Magnusson

Abstract

We propose tests for structural parameters in limited dependent variable models with endogenous explanatory variables. These tests are based upon the generalized minimum distance principle. They are of the correct size regardless of whether the structural parameters are identified and are especially appropriate for models whose moment conditions are non-linear in the parameters. Moreover, they are computationally simple, allowing them to be implemented using a large number of statistical software packages. We compare our tests to Wald tests in a simulation experiment and use them to analyse the female labour supply and the demand for cigarettes. Copyright (C) 2010 The Author(s). The Econometrics Journal (C) 2010 Royal Economic Society

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  • Leandro M. Magnusson, 2010. "Inference in limited dependent variable models robust to weak identification," Econometrics Journal, Royal Economic Society, vol. 13(3), pages 56-79, October.
  • Handle: RePEc:ect:emjrnl:v:13:y:2010:i:3:p:s56-s79
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    3. Frazier, David T. & Renault, Eric & Zhang, Lina & Zhao, Xueyan, 2021. "Weak Identification in Discrete Choice Models," The Warwick Economics Research Paper Series (TWERPS) 1336, University of Warwick, Department of Economics.
    4. Tetsuya Kaji, 2019. "Theory of Weak Identification in Semiparametric Models," Papers 1908.10478, arXiv.org, revised Aug 2020.
    5. Antonio Diez de Los Rios, 2015. "A New Linear Estimator for Gaussian Dynamic Term Structure Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(2), pages 282-295, April.
    6. M. Shahe Emran & Fenohasina Maret-Rakotondrazaka & Stephen C. Smith, 2014. "Education and Freedom of Choice: Evidence from Arranged Marriages in Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 50(4), pages 481-501, April.
    7. Jean-Marie Dufour & Joachim Wilde, 2018. "Weak identification in probit models with endogenous covariates," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 102(4), pages 611-631, October.
    8. Fiorini, Luciana C. & Jetter, Michael & Parmeter, Christopher F. & Parsons, Christopher, 2020. "The Effect of Community Size on Electoral Preferences: Evidence From Post-WWII Southern Germany," IZA Discussion Papers 13724, Institute of Labor Economics (IZA).
    9. David T. Frazier & Eric Renault & Lina Zhang & Xueyan Zhao, 2020. "Weak Identification in Discrete Choice Models," Papers 2011.06753, arXiv.org, revised Jan 2021.
    10. Wendy Correa Martínez & Michael Jetter, 2016. "Isolating causality between gender and corruption: An IV approach," Documentos de Trabajo CIEF 014438, Universidad EAFIT.
    11. Gregory Cox, 2020. "Weak Identification with Bounds in a Class of Minimum Distance Models," Papers 2012.11222, arXiv.org.
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    13. Aparicio, Juan P. & Jetter, Michael, 2020. "Captivating News in Colombia," IZA Discussion Papers 13834, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

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