Econometric Inference Using Hausman Instruments

Jinyong Hahn, Zhipeng Liao (), Nan Liu () and Ruoyao Shi ()
Additional contact information
Zhipeng Liao: Department of Economics, UCLA
Nan Liu: School of Economics, Xiamen University
Ruoyao Shi: Department of Economics, University of California Riverside

No 202406, Working Papers from University of California at Riverside, Department of Economics

Abstract: We examine econometric inferential issues with Hausman instruments. The instrumental variable (IV) estimator based on Hausman instrument has a built-in correlation across observations, which may render the textbook-style standard error invalid. We develop a standard error that is robust to these problems. Clustered standard error is not always valid, but it can be a good pragmatic compromise to deal with the interlinkage problem if Hausman instrument is to be used in econometric models in the tradition of Berry, Levinsohn, and Pakes (1995). Additionally, we find that the Hausman IV is in fact equivalent to the judge IV proposed by Kling (2006), which broadens the implication of our results beyond the industrial organization literature.

Keywords: BLP; Hausman instrument Judge instrument; Stable convergence; Uniformly valid inference (search for similar items in EconPapers)
JEL-codes: C14 C33 C36 (search for similar items in EconPapers)
Pages: 67 Pages
Date: 2024-10
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Working Paper: Econometric Inference Using Hausman Instruments (2024)
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