EFFICIENT INSTRUMENTAL VARIABLES ESTIMATION OF NONLINEAR MODELS

This paper considers asymptotically efficient instrumental variables estimation of nonlinear models in an i.i.d. environment. The optimal instruments are estimated by nonparametric methods, either nearest neighbor or series regression. Ways of choosing the degree of approximation of the nonparametric instruments are discussed. Asymptotic efficiency is shown. The finite sample properties of the estimators are examined in a small sampling study of an endogenous dummy variable model. Copyright 1990 by The Econometric Society.

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