Under-Identification of Structural Models Based on Timing and Information Set Assumptions

24 Pages Posted: 22 Dec 2020 Last revised: 1 Dec 2022

See all articles by Daniel Ackerberg

Daniel Ackerberg

University of Texas at Austin

Garth Frazer

University of Toronto - Rotman School of Management

Kyoo il Kim

Michigan State University - Department of Economics

Yao Luo

University of Toronto - Department of Economics

Yingjun Su

Jinan University - Institute for Economic and Social Research

Date Written: October 22, 2020

Abstract

We revisit identification based on timing and information set assumptions in structural models, which have been used in the context of production functions, demand equations, and hedonic pricing models (e.g. Olley and Pakes (1996), Blundell and Bond (2000)). First, we demonstrate a general underidentification problem using these assumptions in a simple version of the Blundell-Bond dynamic panel model. In particular, the basic moment conditions can yield multiple discrete solutions: one at the persistence parameter in the main equation and another at the persistence parameter governing the regressor. We then show that the problem can persist in a broader set of models but disappears in models under stronger timing assumptions. We then propose a possible solution in the simple setting by enforcing an assumed sign restriction and discuss more general practical advice for empirical researchers using these methods.

Keywords: Production Function, Identification, Timing and Information Set Assumptions, Market Persistence Factor

JEL Classification: C14, C18, D24

Suggested Citation

Ackerberg, Daniel and Frazer, Garth and Kim, Kyoo il and Luo, Yao and Su, Yingjun, Under-Identification of Structural Models Based on Timing and Information Set Assumptions (October 22, 2020). Available at SSRN: https://ssrn.com/abstract=3717757 or http://dx.doi.org/10.2139/ssrn.3717757

Daniel Ackerberg

University of Texas at Austin

Garth Frazer

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Kyoo il Kim

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States

Yao Luo

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada

Yingjun Su (Contact Author)

Jinan University - Institute for Economic and Social Research ( email )

601 West Whampoa Road
Tianhe District
Guangzhou, 510632
China

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