Nonparametric "rich covariates" without saturation

Ludgero Glorias, Federico Martellosio and J. M. C. Santos Silva

Papers from arXiv.org

Abstract: We consider two nonparametric approaches to ensure that instrumental variables estimators of a linear equation satisfy the rich-covariates condition emphasized by Blandhol et al. (2025), even when the instrument is not unconditionally randomly assigned and the model is not saturated. Both approaches start with a nonparametric estimate of the expectation of the instrument conditional on the covariates, and ensure that the rich-covariates condition is satisfied either by using as the instrument the difference between the original instrument and its estimated conditional expectation, or by adding the estimated conditional expectation to the set of regressors. We derive asymptotic properties of our instrumental variables estimators, and assess their finite sample performance relative to existing approaches using Monte Carlo simulations.

Date: 2025-05
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2505.21213

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