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Problems with the Control Variable Approach in Achieving Unbiased Estimates in Nonlinear Models in the Presence of Many Instruments

Author

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  • Jinyong Hahn

    (UCLA Economics)

  • Jerry Hausman

    (MIT Economics)

Abstract

We present a pseudo-panel model and argue that the control variable approach is subject to the many instrument problem, since it uses the predicted value of the endogenous variable. We show how the bias can be analytically characterized. Finally, we demonstrate the problems of split sample cross fitting.

Suggested Citation

  • Jinyong Hahn & Jerry Hausman, 2021. "Problems with the Control Variable Approach in Achieving Unbiased Estimates in Nonlinear Models in the Presence of Many Instruments," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(1), pages 39-58, December.
    • Handle: RePEc:spr:jqecon:v:19:y:2021:i:1:d:10.1007_s40953-021-00262-y
    DOI: 10.1007/s40953-021-00262-y
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    References listed on IDEAS

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    Cited by:

    1. Yong Bao & Aman Ullah, 2021. "The Special Issue in Honor of Anirudh Lal Nagar: An Introduction," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(1), pages 1-8, December.

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    More about this item

    Keywords

    Control variable; Many instruments; Nonlinear models;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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