Under-Identification of Structural Models Based on Timing and Information Set Assumptions
Daniel Ackerberg (),
Kyoo il Kim,
Yao Luo and
Working Papers from University of Toronto, Department of Economics
We revisit identification based on timing and information set assumptions in structural models, which have been used in the context of production functions, demand equations, and hedonic pricing models (e.g. Olley and Pakes (1996), Blundell and Bond (2000)). First, we demonstrate a general under-identification problem using these assumptions, illustrating this with a simple version of the Blundell-Bond dynamic panel model. In particular, the basic moment conditions can yield multiple discrete solutions: one at the persistence parameter in the main equation and another at the persistence parameter governing the regressor. Second, we propose possible solutions based on sign restrictions and an augmented moment approach. We show the identification of our approach and propose a consistent estimation procedure. Our Monte Carlo simulations illustrate the underidentification issue and finite sample performance of our proposed estimator. Lastly, we show that the problem persists in many alternative models of the regressor but disappears in some models under stronger assumptions.
Keywords: Production Function; Identification; Timing and Information Set Assumptions; Market Persistence Factor; Monte Carlo Simulation (search for similar items in EconPapers)
JEL-codes: C14 C18 D24 (search for similar items in EconPapers)
Pages: Unknown pages
New Economics Papers: this item is included in nep-ecm and nep-ore
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