Mikusheva, Anna; Sun, Liyang; (2024) Weak identification with many instruments. The Econometrics Journal , 27 (2) C1-C28. 10.1093/ectj/utae007.

Text many_IV_EJ (1).pdf - Accepted Version Access restricted to UCL open access staff until 22 March 2026. Download (508kB)

Abstract

Linear instrumental variable regressions are widely used to estimate causal effects. Many instruments arise from the use of ‘technical’ instruments and more recently from the empirical strategy of ‘judge design’. This paper surveys and summarises ideas from recent literature on estimation and statistical inferences with many instruments for a single endogenous regressor. We discuss how to assess the strength of the instruments and how to conduct weak identification robust inference under heteroskedasticity. We establish new results for a jack-knifed version of the Lagrange Multiplier test statistic. Furthermore, we extend the weak identification robust tests to settings with both many exogenous regressors and many instruments. We propose a test that properly partials out many exogenous regressors while preserving the re-centring property of the jack-knife. The proposed tests have correct size and good power properties.

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