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Penalized GMM Framework for Inference on Functionals of Nonparametric Instrumental Variable Estimators

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  • Edvard Bakhitov

Abstract

This paper develops a penalized GMM (PGMM) framework for automatic debiased inference on functionals of nonparametric instrumental variable estimators. We derive convergence rates for the PGMM estimator and provide conditions for root-n consistency and asymptotic normality of debiased functional estimates, covering both linear and nonlinear functionals. Monte Carlo experiments on average derivative show that the PGMM-based debiased estimator performs on par with the analytical debiased estimator that uses the known closed-form Riesz representer, achieving 90-96% coverage while the plug-in estimator falls below 5%. We apply our procedure to estimate mean own-price elasticities in a semiparametric demand model for differentiated products. Simulations confirm near-nominal coverage while the plug-in severely undercovers. Applied to IRI scanner data on carbonated beverages, debiased semiparametric estimates are approximately 20% more elastic compared to the logit benchmark, and debiasing corrections are heterogeneous across products, ranging from negligible to several times the standard error.

Suggested Citation

  • Edvard Bakhitov, 2026. "Penalized GMM Framework for Inference on Functionals of Nonparametric Instrumental Variable Estimators," Papers 2603.29889, arXiv.org, revised Apr 2026.
  • Handle: RePEc:arx:papers:2603.29889
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