Estimation of Nonlinear Models with Mismeasured Regressors using Marginal Information

Abstract:     
We consider the estimation of nonlinear models with mismeasured explanatory variables, when information on the marginal distribution of the true values of these variables is available. We derive a semi-parametric MLE that is is shown to be square root n consistent and asymptotically normally distributed. In a simulation experiment we find that the finite sample distribution of the estimator is close to the asymptotic approximation. The semi-parametric MLE is applied to a duration model for AFDC welfare spells with misreported welfare benefits. The marginal distribution of the correctly measured welfare benefits is obtained from an administrative source.

Number of Pages in PDF File: 58

Keywords: measurement error model, marginal information, deconvolution, Fourier transform, duration model, welfare spells

JEL Classification: C14, C41, I38

working papers series