centre for microdata methods and practice

ESRC centre

cemmap is an ESRC research centre

ESRC

Keep in touch

Subscribe to cemmap news

Decentralization estimators for instrumental variable quantile regression models

Authors: Hiroaki Kaido and Kaspar W├╝thrich
Date: 31 December 2018
Type: cemmap Working Paper, CWP72/18

Abstract

The instrumental variable quantile regression (IVQR) model of Chernozhukov and Hansen (2005, 2006) is a exible and powerful tool for evaluating the impact of endogenous covariates on the whole distribution of the outcome of interest. Estimation, however, is computationally burdensome because the GMM objective function is non-smooth and non-convex. This paper shows that the IVQR estimation problem can be decomposed into a set of conventional quantile regression sub-problems, which are convex and can be solved efficiently. This allows for reformulating the original estimation problem as the problem of finding the fixed point of a low dimensional map. This reformulation leads to new identi fication results and, most importantly, to practical, easy to implement, and computationally tractable estimators. We explore estimation algorithms based on the contraction mapping theorem and algorithms based on root-fi nding methods. We prove consistency and asymptotic normality of our estimators and establish the validity of a bootstrap procedure for estimating the limiting laws. Monte Carlo simulations support the estimator's enhanced computational tractability and demonstrate desirable finite sample properties.

Download full version

Search cemmap

Search by title, topic or name.

Contact cemmap

Centre for Microdata Methods and Practice

How to find us

Tel: +44 (0)20 7291 4800

E-mail us