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Instrument-free inference under confined regressor endogeneity and mild regularity

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  • Kiviet, Jan F.

Abstract

The instrument-free approach adopts flexible bounds on the correlation between regressors and disturbances, instead of exploiting instruments presupposing their asymptotic uncorrelatedness with the model errors. Earlier findings on such instrument-free inference methods assumed the observations to be mesokurtic and independent and identically distributed. Adopting substantially weaker regularity, this alternative to Two-Stage Least-Squares (TSLS) is developed and simulated for general linear regression models, permitting time-dependent regressors with heterogeneous excess kurtosis. Replicating three prominent empirical studies TSLS is shown to be based on untenable exclusion restrictions, whereas instrument-free inference can arguably be more credible, while potentially producing narrower confidence intervals than (weak-instrument robust) TSLS.

Suggested Citation

  • Kiviet, Jan F., 2023. "Instrument-free inference under confined regressor endogeneity and mild regularity," Econometrics and Statistics, Elsevier, vol. 25(C), pages 1-22.
  • Handle: RePEc:eee:ecosta:v:25:y:2023:i:c:p:1-22
    DOI: 10.1016/j.ecosta.2021.12.008
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    More about this item

    Keywords

    endogeneity robust inference; exclusion restrictions test; replication studies; sensitivity analysis;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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