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Algebraic Theory of Indentification in Parametric Models

National Bank of Poland Working Paper No. 88

41 Pages Posted: 4 Aug 2011 Last revised: 8 Jul 2016

Andrzej Kociecki

National Bank of Poland

Date Written: July 1, 2011

Abstract

The paper presents the problem of identification in parametric models from the algebraic point of view. We argue that it is not just another perspective but the proper one. That is using our approach we can see the very nature of the identification problem, which is slightly different than that suggested in the literature. In practice it means that in many models we can unambiguously estimate parameters that have been thought as unidentifiable. This is illustrated in the case of Simultaneous Equations Model (SEM), where our analysis leads to conclusion that existing identification conditions, although correct, are based on the inappropriate premise: only the structural parameters that are in one–to–one correspondence with the reduced form parameters are identified. We will show that this is not true. In fact there are other structural parameters, which are identified, but can not be uniquely recovered from the reduced form parameters. Although we apply our theory only to SEM, it can be used in many standard econometric models.

Keywords: identification, group theory, orbits, orbit representatives, simultaneous

JEL Classification: C10, C18, C30

Suggested Citation

Kociecki, Andrzej, Algebraic Theory of Indentification in Parametric Models (July 1, 2011). National Bank of Poland Working Paper No. 88. Available at SSRN: https://ssrn.com/abstract=1904832 or http://dx.doi.org/10.2139/ssrn.1904832

Andrzej Kociecki (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

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