Identification and Method of Moments Estimation in Polynomial Measurement Error Models

Erik Biørn

Memo 01/2017

Abstract

Estimation of polynomial regression equations in one error-ridden variable and a number of error-free regressors, as well as an instrument set for the former is considered. Procedures for identification, operating on moments up to a certain order, are elaborated for single- and multi-equation models. Weak distributional assumptions are made for the error and the latent regressor. Simple order-conditions are derived, and procedures involving recursive identification of the moments of the regressor and its measurement errors together with the coefficients of the polynomials are considered. A Generalized Method of Moments (GMM) algorithm involving the instruments and proceeding stepwise from the identification procedures, is presented. An illustration for systems of linear, quadratic and cubic Engel functions, with household consumption and income data is given.

 

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Published Jan. 30, 2017 1:56 PM