Title: Inference in instrumental variables models with heteroskedasticity and many instruments
Authors: Federico Crudu - University of Siena (Italy)
Giovanni Mellace - University of Southern Denmark (Denmark) [presenting]
Zsolt Zandor - Sapientia University Miercurea Ciuc (Romania)
Abstract: A specification test is proposed for instrumental variable models that is robust to the presence of heteroskedasticity. The test can be seen as a generalization the Anderson-Rubin test. Our approach is based on the jackknife principle. We are able to show that under the null the proposed statistic has a Gaussian limiting distribution. Moreover, a simulation study shows its competitive finite sample properties in terms of size and power. Finally, we provide an empirical application using college proximity instruments to estimate the returns of education.