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Econometric Inference Using Hausman Instruments

Author

Listed:
  • Jinyong Hahn

    (UCLA)

  • Zhipeng Liao

    (UCLA)

  • Nan Liu

    (Xiamen University)

  • Ruoyao Shi

    (Department of Economics, University of California Riverside)

Abstract

We examine econometric inferential issues with Hausman instruments. The instrumental variable (IV) estimator based on Hausman instrument has a built-in correlation across observations, which may render the textbook-style standard error invalid. We develop a standard error that is robust to these problems. Clustered standard error is not always valid, but it can be a good pragmatic compromise to deal with the interlinkage problem if Hausman instrument is to be used in econometric models in the tradition of Berry, Levinsohn, and Pakes (1995).

Suggested Citation

  • Jinyong Hahn & Zhipeng Liao & Nan Liu & Ruoyao Shi, 2024. "Econometric Inference Using Hausman Instruments," Working Papers 202405, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:202405
    as

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    File URL: https://economics.ucr.edu/repec/ucr/wpaper/202405.pdf
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    References listed on IDEAS

    as
    1. Kuersteiner, Guido M. & Prucha, Ingmar R., 2013. "Limit theory for panel data models with cross sectional dependence and sequential exogeneity," Journal of Econometrics, Elsevier, vol. 174(2), pages 107-126.
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    More about this item

    Keywords

    BLP; Hausman instrument Judge instrument; Stable convergence; Uniformly valid inference;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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