Intersection bounds: estimation and inference

Victor Chernozhukov, Sokbae (Simon) Lee and Adam Rosen

No 34/11, CeMMAP working papers from Institute for Fiscal Studies

Abstract: We develop a practical and novel method for inference on intersection bounds, namely bounds defined by either the infimum or supremum of a parametric or nonparametric function, or equivalently, the value of a linear programming problem with a potentially infinite constraint set. Our approach is especially convenient for models comprised of a continuum of inequalities that are separable in parameters, and also applies to models with inequalities that are non-separable in parameters. Since analog estimators for intersection bounds can be severely biased in finite samples, routinely underestimating the size of the identified set, we also offer a median-bias-corrected estimator of such bounds as a natural by-product of our inferential procedures. We develop theory for large sample inference based on the strong approximation of a sequence of series or kernel-based empirical processes by a sequence of "penultimate" Gaussian processes. These penultimate processes are generally not weakly convergent, and thus non-Donsker. Our theoretical results establish that we can nonetheless perform asymptotically valid inference based on these processes. Our construction also provides new adaptive inequality/moment selection methods. We provide conditions for the use of nonparametric kernel and series estimators, including a novel result that establishes strong approximation for any general series estimator admitting linearization, which may be of independent interest.

Date: 2011-11-04
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Related works:
Journal Article: Intersection Bounds: Estimation and Inference (2013)
Working Paper: Intersection bounds: estimation and inference (2012)
Working Paper: Intersection bounds: estimation and inference (2012)
Working Paper: Intersection bounds: estimation and inference (2011)
Working Paper: Intersection Bounds: estimation and inference (2009)
Working Paper: Intersection Bounds: estimation and inference (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:azt:cemmap:34/11

DOI: 10.1920/wp.cem.2011.3411

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