Efficient size correct subset inference in homoskedastic linear instrumental variables regression

Frank Kleibergen

Journal of Econometrics, 2021, vol. 221, issue 1, 78-96

Abstract: We show that Moreira’s (2003) conditional critical value function for likelihood ratio (LR) tests on the structural parameter in homoskedastic linear instrumental variables (IV) regression provides a bounding critical value function for subset LR tests on one structural parameter of several for general homoskedastic linear IV regression. The resulting subset LR test is size correct under weak identification and efficient under strong identification. A power study shows that it outperforms the subset Anderson–Rubin test with conditional critical values from Guggenberger et al. (2019a) when the structural parameters are reasonably identified and has slightly less power when identification is weak.

Keywords: Weak instruments; Subset testing; Identification; Conditional inference; Discriminatory power; Asymptotic size (search for similar items in EconPapers)
JEL-codes: C12 C26 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:221:y:2021:i:1:p:78-96

DOI: 10.1016/j.jeconom.2019.10.013

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