Nonparametric instrumental variable estimation under monotonicity

DOI10.3982/ECTA13639MaRDI QIDQ4612532zbMATH OpenFDO

Authors Denis Chetverikov, Daniel Wilhelm

Publication date 31 January 2019

Published in Econometrica (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1507.05270

zbMATH Keywords

instrumental variablemeasure of ill-posednessmonotonicitynonparametric estimation

Mathematics Subject Classification ID

Density estimation (62G07) Nonparametric robustness (62G35)

Abstract: The ill-posedness of the inverse problem of recovering a regression function in a nonparametric instrumental variable model leads to estimators that may suffer from a very slow, logarithmic rate of convergence. In this paper, we show that restricting the problem to models with monotone regression functions and monotone instruments significantly weakens the ill-posedness of the problem. In stark contrast to the existing literature, the presence of a monotone instrument implies boundedness of our measure of ill-posedness when restricted to the space of monotone functions. Based on this result we derive a novel non-asymptotic error bound for the constrained estimator that imposes monotonicity of the regression function. For a given sample size, the bound is independent of the degree of ill-posedness as long as the regression function is not too steep. As an implication, the bound allows us to show that the constrained estimator converges at a fast, polynomial rate, independently of the degree of ill-posedness, in a large, but slowly shrinking neighborhood of constant functions. Our simulation study demonstrates significant finite-sample performance gains from imposing monotonicity even when the regression function is rather far from being a constant. We apply the constrained estimator to the problem of estimating gasoline demand functions from U.S. data.

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Cited in

(16)

• Optimal linear instrumental variables approximations
• Direct instrumental nonparametric estimation of inverse regression functions
• Estimation of Heterogeneous Individual Treatment Effects With Endogenous Treatments
• On ill-posedness of nonparametric instrumental variable regression with convexity constraints
• Specification testing in nonparametric instrumental quantile regression
• Testing generalized regression monotonicity
• Monotonicity Conditions and Inequality Imputation for Sample-Selection and Non-Response Problems
• Market counterfactuals and the specification of multiproduct demand: A nonparametric approach
• Recovering Latent Variables by Matching
• One-step smoothing splines instrumental regression
• Gaussian transforms modeling and the estimation of distributional regression functions
• Estimation of spatial autoregressive panel data models with nonparametric endogenous effect
• A general test for functional inequalities
• Adaptive, rate-optimal hypothesis testing in nonparametric IV models
• Adaptive estimation and uniform confidence bands for nonparametric structural functions and elasticities
• Partly linear instrumental variables regressions without smoothing on the instruments

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