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Inference under First-Order Degeneracy

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  • Xinyue Bei
  • Manu Navjeevan

Abstract

We study inference in models where a transformation of parameters exhibits first-order degeneracy -- that is, its gradient is zero or close to zero, making the standard delta method invalid. A leading example is causal mediation analysis, where the indirect effect is a product of coefficients and the gradient degenerates near the origin. In these local regions of degeneracy the limiting behaviors of plug-in estimators depend on nuisance parameters that are not consistently estimable. We show that this failure is intrinsic -- around points of degeneracy, both regular and quantile-unbiased estimation are impossible. Despite these restrictions, we develop minimum-distance methods that deliver uniformly valid confidence intervals. We establish sufficient conditions under which standard chi-square critical values remain valid, and propose a simple bootstrap procedure when they are not. We demonstrate favorable power in simulations and in an empirical application linking teacher gender attitudes to student outcomes.

Suggested Citation

  • Xinyue Bei & Manu Navjeevan, 2026. "Inference under First-Order Degeneracy," Papers 2602.07377, arXiv.org.
  • Handle: RePEc:arx:papers:2602.07377
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    References listed on IDEAS

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