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GMM is Inadmissible Under Weak Identification

Isaiah Andrews, Anna Mikusheva

arXiv 26 Apr 2022 · Econometrics · 2 citations (OpenAlex)

arXiv:2204.12462 · PDF · DOI · OpenAlex · Extracted main text

Abstract

We consider estimation in moment condition models and show that under any bound on identification strength, asymptotically admissible (i.e. undominated) estimators in a wide class of estimation problems must be uniformly continuous in the sample moment function. GMM estimators are in general discontinuous in the sample moments, and are thus inadmissible. We show, by contrast, that bagged, or bootstrap aggregated, GMM estimators as well as quasi-Bayes posterior means have superior continuity properties, while results in the literature imply that they are equivalent to GMM when identification is strong. In simulations calibrated to published instrumental variables specifications, we find that these alternatives often outperform GMM.

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