Estimation with inequality constraints on the parameters: dealing with truncation of the sampling distribution

William Barnett and Ousmane Seck

MPRA Paper from University Library of Munich, Germany

Abstract: Theoretical constraints on economic-model parameters often are in the form of inequality restrictions. For example, many theoretical results are in the form of monotonicity or nonnegativity restrictions. Inequality constraints can truncate sampling distributions of parameter estimators, so that asymptotic normality no longer is possible. Sampling theoretic asymptotic inference is thereby greatly complicated or compromised. We use numerical methods to investigate the resulting sampling properties of inequality constrained estimators produced by popular methods of imposing inequality constraints. In particular, we investigate the possible bias in the asymptotic standard errors of estimators of inequality constrained estimators, when the constraint is imposed by the popular method of squaring. That approach is known to violate a regularity condition in the available asymptotic proofs regarding the unconstrained estimator, since the sign of the unconstrained estimator, prior to squaring, is nonidentified.

Keywords: inequality constraints; truncation of sampling distribution; asymptotics; constrained estimation (search for similar items in EconPapers)
JEL-codes: C13 C15 C16 (search for similar items in EconPapers)
Date: 2008-08-28
New Economics Papers: this item is included in nep-ecm
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https://mpra.ub.uni-muenchen.de/14987/2/MPRA_paper_14987.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:12500

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