 Feasible IV regression without excluded instrumentsThe Econometrics Journal, 2023, vol. 26, issue 2, 235-256 Abstract: SummaryThe relevance condition of integrated conditional moment (ICM) estimators is significantly weaker than the conventional instrumental variable's in at least two respects: (1) consistent estimation without excluded instruments is possible, provided endogenous covariates are nonlinearly mean-dependent on exogenous covariates, and (2) endogenous covariates may be uncorrelated with but mean-dependent on instruments. These remarkable properties notwithstanding, multiplicative-kernel ICM estimators suffer diminished identification strength, large bias, and severe size distortions even for a moderately sized instrument vector. This paper proposes a computationally fast linear ICM estimator that better preserves identification strength in the presence of multiple instruments and a test of the ICM relevance condition. Monte Carlo simulations demonstrate a considerably better size control in the presence of multiple instruments and a favourably competitive performance in general. An empirical example illustrates the practical usefulness of the estimator, where estimates remain plausible when no excluded instrument is used. Keywords: Endogeneity; Martingale difference divergence; integrated conditional moment; linear completeness (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:emjrnl:v:26:y:2023:i:2:p:235-256. Access Statistics for this article The Econometrics Journal is currently edited by Jaap Abbring More articles in The Econometrics Journal from Royal Economic Society Contact information at EDIRC. |
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