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An alternative way of computing efficient instrumental variable estimators

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  • Chen, Xiaohong
  • Linton, Oliver
  • Jacho-Chávez, David T.

Abstract

A new way of constructing efficient semiparametric instrumental variable estimators is proposed. The method involves the combination of a large number of possibly inefficient estimators rather than combining the instruments into an optimal instrument function. The consistency and asymptotic normality is established for a class of estimators that are linear combinations of a set of√�� �� consistent estimators whose cardinality increases with sample size. It is shown that the semiparametrically efficient estimator lies in this class. The proofs do not rely on smoothness of underlying criterion functions. Potential use of the estimator can overcome the undersized sample problem. in simultaneous equation system estimation.

Suggested Citation

  • Chen, Xiaohong & Linton, Oliver & Jacho-Chávez, David T., 2009. "An alternative way of computing efficient instrumental variable estimators," LSE Research Online Documents on Economics 58016, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:58016
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    Cited by:

    1. Cavit Pakel & Neil Shephard & Kevin Sheppard & Robert F. Engle, 2021. "Fitting Vast Dimensional Time-Varying Covariance Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 39(3), pages 652-668, July.
    2. DiTraglia, Francis J., 2016. "Using invalid instruments on purpose: Focused moment selection and averaging for GMM," Journal of Econometrics, Elsevier, vol. 195(2), pages 187-208.
    3. Lorenzo Ricci & David Veredas, 2012. "TailCoR," Working Papers 1227, Banco de España.
      • Sla{dj}ana Babi'c & Christophe Ley & Lorenzo Ricci & David Veredas, 2020. "TailCoR," Papers 2011.14817, arXiv.org.
    4. Yves Dominicy & Hiroaki Ogata & David Veredas, 2013. "Inference for vast dimensional elliptical distributions," Computational Statistics, Springer, vol. 28(4), pages 1853-1880, August.
    5. Carrasco, Marine, 2012. "A regularization approach to the many instruments problem," Journal of Econometrics, Elsevier, vol. 170(2), pages 383-398.
    6. Francis J. DiTraglia, 2011. "Using Invalid Instruments on Purpose: Focused Moment Selection and Averaging for GMM, Second Version," PIER Working Paper Archive 14-045, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 09 Dec 2014.
    7. Francis DiTraglia, 2011. "Using Invalid Instruments on Purpose: Focused Moment Selection and Averaging for GMM, Second Version," PIER Working Paper Archive 15-027, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 10 Aug 2015.

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    More about this item

    Keywords

    instrumental variables; minimum distance; semiparametric efficiency; two-stage least squares;
    All these keywords.

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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