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Reducing asymptotic bias of weak instrumental estimation using independently repeated cross-sectional information

Listed author(s):
  • Cai, Zongwu
  • Fang, Ying
  • Su, Jia

In this paper, we consider the instrumental variable estimation (the two-stage least squares estimator and the limited information maximum likelihood estimator) using weak instruments in a repeated measurements or a panel data model. We show that independently repeated cross-sectional data can reduce the asymptotic bias of the instrumental variable estimation when instruments are weakly correlated with endogenous variables. When the number of repeated measurements tends to infinity, we can achieve consistent instrumental variable estimation with weak instruments.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167715211003142
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Article provided by Elsevier in its journal Statistics & Probability Letters.

Volume (Year): 82 (2012)
Issue (Month): 1 ()
Pages: 180-185

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Handle: RePEc:eee:stapro:v:82:y:2012:i:1:p:180-185
DOI: 10.1016/j.spl.2011.09.020
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  7. Nelson, C. & Startz, R., 1988. "The Distribution Of The Instrumental Variables Estimator And Its T-Ratio When The Instrument Is A Poor One," Discussion Papers in Economics at the University of Washington 88-07, Department of Economics at the University of Washington.
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