Worst-case estimation and asymptotic theory for models with unobservables
This paper proposes a worst-case approach for estimating econometric models containing unobservable variables. Worst-case estimators are robust against the adverse effects of unobservables. In contrast to the classical literature, there are no assumptions about the statistical nature of the unobservables in a worst-case estimation. This method is robust with respect to the unknown probability distribution of the unobservables and should be seen as a complement to standard methods, as cautious modelers should compare different estimations to determine robust models. The limit theory is obtained. A Monte Carlo study of finite sample properties has been conducted. An economic application is included.
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- Chamberlain, Gary, 1977. "Education, income, and ability revisited," Journal of Econometrics, Elsevier, vol. 5(2), pages 241-257, March.
- Aigner, Dennis J. & Hsiao, Cheng & Kapteyn, Arie & Wansbeek, Tom, 1984. "Latent variable models in econometrics," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 23, pages 1321-1393 Elsevier.
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