Weak Instrumental Variables Models for Longitudinal Data

Zongwu Cai, Ying Fang and Henong Li

Econometric Reviews, 2012, vol. 31, issue 4, 361-389

Abstract: This article considers the estimation and testing of a within-group two-stage least squares (TSLS) estimator for instruments with varying degrees of weakness in a longitudinal (panel) data model. We show that adding the repeated cross-sectional information into a regression model can improve the estimation in weak instruments. Moreover, the consistency and limiting distribution of the TSLS estimator are established when both N and T tend to infinity. Some asymptotically pivotal tests are extended to a longitudinal data model and their asymptotic properties are examined. A Monte Carlo experiment is conducted to evaluate the finite sample performance of the proposed estimators.

Date: 2012
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DOI: 10.1080/07474938.2011.607356

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