ML and GMM with concentrated instruments in the static panel data model

Paul Bekker*, Jelle van Essen

*Corresponding author for this work

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Abstract

We study the asymptotic behavior of instrumental variable estimators in the static panel model under many-instruments asymptotics. We provide new estimators and standard errors based on concentrated instruments as alternatives to an estimator based on maximum likelihood. We prove that the latter estimator is consistent under many-instruments asymptotics only if the starting value in an iterative procedure is root-N consistent. A similar approach for continuous updating GMM shows the derivation is nontrivial. For the standard cross-sectional case (T = 1), the simple formulation of standard errors offer an alternative to earlier formulations.

Original languageEnglish
Pages (from-to)181-195
Number of pages15
JournalEconometric Reviews
Volume39
Issue number2
Early online date23-Mar-2019
DOIs
Publication statusPublished - 2020

Keywords

  • Bekker standard errors
  • LIML
  • many-instruments asymptotics
  • panel data
  • weak instruments
  • VARIABLE ESTIMATION

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