Testing Overidentifying Restrictions with Many Instruments and Heteroskedasticity
Norman Swanson (),
John Chao (),
Whitney Newey and
Tiemen Woutersen ()
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Tiemen Woutersen: Johns Hopkins University
Departmental Working Papers from Rutgers University, Department of Economics
This paper gives a test of overidentifying restrictions that is robust to many instruments and heteroskedasticity. It is based on a jackknife version of the Sargan test statistic, having a numerator that is the objective function minimized by the JIVE2 estimator of Angrist, Imbens, and Krueger (1999). Correct asymptotic critical values are derived for this test when the number of instruments grows large, at a rate up to the sample size. It is also shown that the test is valid when the number instruments is fixed and there is homoskedasticity. This test improves on recently proposed tests by allowing for heteroskedasticity and by avoiding assumptions on the instrument projection matrix. The asymptotics is based on the heteroskedasticity robust many instrument asymptotics of Chao et. al. (2010).
Keywords: heteroskedasticity; instrumental variables; jackknife estimation; many instruments; weak instruments (search for similar items in EconPapers)
JEL-codes: C13 C31 (search for similar items in EconPapers)
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Journal Article: Testing overidentifying restrictions with many instruments and heteroskedasticity (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:201118
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