COMPARISON OF INFERENTIAL METHODS IN PARTIALLY IDENTIFIED MODELS IN TERMS OF ERROR IN COVERAGE PROBABILITY

Federico Bugni

Econometric Theory, 2016, vol. 32, issue 1, 187-242

Abstract: This paper considers the problem of coverage of the elements of the identified set in a class of partially identified econometric models with a prespecified probability. In order to conduct inference in partially identified econometric models defined by moment (in)equalities, the literature has proposed three methods: bootstrap, subsampling, and asymptotic approximation. The objective of this paper is to compare these methods in terms of the rate at which they achieve the desired coverage level, i.e., in terms of the rate at which the error in the coverage probability (ECP) converges to zero. Under certain conditions, we show that the ECP of the bootstrap and the ECP of the asymptotic approximation converge to zero at the same rate, which is a faster rate than that of the ECP of subsampling methods. As a consequence, under these conditions, the bootstrap and the asymptotic approximation produce inference that is more precise than subsampling. A Monte Carlo simulation study confirms that these results are relevant in finite samples.

Date: 2016
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