Instrumental variable estimation based on conditional median restriction

摘要

We develop a method, named the L_1IV estimator, to estimate structural equations based on the conditional median restriction imposed on the error terms. We study its asymptotic behavior and show how to estimate its asymplotic covariance matrix. We also discuss the point identification in the L_1 IV estimation and propose an over-identifying restriction test. We further demonstrate the performance of the L_1 IV estimator in comparison with the familiar two-stage least squares estimator. The proposed method is applied to estimate the labor supply and wage offer functions for working, married women.