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re: Re: st: GMM with inequality and equality constraints

From   Christopher Baum <[email protected]>
To   "[email protected]" <[email protected]>
Subject   re: Re: st: GMM with inequality and equality constraints
Date   Fri, 16 Mar 2012 11:02:11 -0400

Stas said

The first one looks like the regular GMM equation to me. The second
one is pretty much impossible to implement directly. You can introduce
a Lagrange multiplier in front of it:

E lambda[ gamma y_i + delta z_i ] = 0

You would probably run into identification problems and/or problems
with the standard errors: if the constraint is active, then gamma and
delta are not identified; if it is not, then lambda is identically
zero, and would have to have a missing standard error.

Although I was unaware of this literature until a few minutes ago (there are some rewards to reading dissertation fellowship applications), there appears to be a growing literature dealing with "moment inequalities" of the sort mentioned in this thread. The primary reference is

Pakes A, Porter K, Ho K, Ishii J.,"moment inequalities and their applications", CEMMAP paper CWP16/07, Institute for Fiscal Studies


Kit Baum   |   Boston College Economics & DIW Berlin   |
                             An Introduction to Stata Programming  |
  An Introduction to Modern Econometrics Using Stata  |

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