Testing Overidentifying Restrictions with Many Instruments and Heteroskedasticity

Norman Swanson (), John Chao (), Jerry Hausman, Whitney Newey and Tiemen Woutersen

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: 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)
Pages: 20 pages
Date: 2011-05-15
New Economics Papers: this item is included in nep-ecm
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http://www.sas.rutgers.edu/virtual/snde/wp/2011-18.pdf (application/pdf)

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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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