Working Paper: NBER ID: w26374
Authors: Isaiah Andrews; Jonathan Roth; Ariel Pakes
Abstract: We show that moment inequalities in a wide variety of economic applications have a particular linear conditional structure. We use this structure to construct uniformly valid confidence sets that remain computationally tractable even in settings with nuisance parameters. We first introduce least favorable critical values which deliver non-conservative tests if all moments are binding. Next, we introduce a novel conditional inference approach which ensures a strong form of insensitivity to slack moments. Our recommended approach is a hybrid technique which combines desirable aspects of the least favorable and conditional methods. The hybrid approach performs well in simulations calibrated to Wollmann (2018), with favorable power and computational time comparisons relative to existing alternatives.
Keywords: moment inequalities; conditional moment restrictions; econometrics
JEL Codes: C12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| binding moments (Y20) | exact asymptotic size of LF test (C12) |
| slack moments (J22) | power of LF test (C12) |
| slack moments (J22) | validity of conditional test (C52) |
| subset of moments becomes slack (C69) | conditional test converges to test excluding slack moments (C62) |
| hybrid test (C52) | good power and computational efficiency (C63) |