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A Consistent Variance Estimator for 2SLS When Instruments Identify Different LATEs

Cited 6 time in Web of Science Cited 6 time in Scopus
Authors

Lee, Seo Jeong

Issue Date
2018-07
Publisher
American Statistical Association
Citation
Journal of Business and Economic Statistics, Vol.36 No.3, pp.400-410
Abstract
Under treatment effect heterogeneity, an instrument identifies the instrument-specific local average treatment effect (LATE). With multiple instruments, two-stage least squares (2SLS) estimand is a weighted average of different LATEs. What is often overlooked in the literature is that the postulated moment condition evaluated at the 2SLS estimand does not hold unless those LATEs are the same. If so, the conventional heteroscedasticity-robust variance estimator would be inconsistent, and 2SLS standard errors based on such estimators would be incorrect. I derive the correct asymptotic distribution, and propose a consistent asymptotic variance estimator by using the result of Hall and Inoue (2003, Journal of Econometrics) on misspecified moment condition models. This can be used to correctly calculate the standard errors regardless of whether there is more than one LATE or not.
ISSN
0735-0015
URI
https://hdl.handle.net/10371/200554
DOI
https://doi.org/10.1080/07350015.2016.1186555
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  • College of Social Sciences
  • Department of Economics
Research Area GMM추정, causal inference with instrumental variables and GMM,, cluster sampling, robust inference, 군집표집, 로버스트 추정

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