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GEL METHODS FOR NONSMOOTH MOMENT INDICATORS

Published online by Cambridge University Press:  30 April 2010

Paulo M.D.C. Parente  and
Richard J. Smith
Paulo M.D.C. Parente*
Affiliation:
University of Exeter
Richard J. Smith
Affiliation:
Centre for Microdata Methods and Practice, University College London and Institute for Fiscal Studies, and University of Cambridge
*
*Address correspondence to Paulo M.D.C. Parente, Department of Economics, University of Exeter, Streatham Court, Rennes Drive, Exeter EX4 4PU, UK; e-mail: p.m.parente@exeter.ac.uk.
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Abstract

This paper considers the first-order large sample properties of the generalized empirical likelihood (GEL) class of estimators for models specified by nonsmooth indicators. The GEL class includes a number of estimators recently introduced as alternatives to the efficient generalized method of moments (GMM) estimator that may suffer from substantial biases in finite samples. These include empirical likelihood (EL), exponential tilting (ET), and the continuous updating estimator (CUE). This paper also establishes the validity of tests suggested in the smooth moment indicators case for overidentifying restrictions and specification. In particular, a number of these tests avoid the necessity of providing an estimator for the Jacobian matrix that may be problematic for the sample sizes typically encountered in practice.

Type
ARTICLES
Information
Econometric Theory , Volume 27 , Issue 1: SPECIAL ISSUE ON EMPIRICAL LIKELIHOOD AND RELATED METHODS , February 2011 , pp. 74 - 113
Copyright
Copyright © Cambridge University Press 2010

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