Indirect inference in structural econometric models

Abstract

This paper considers parametric inference in a wide range of structural econometric models. It illustrates how the indirect inference principle can be used in the inference of these models. Specifically, we show that an ordinary least squares (OLS) estimation can be used as an auxiliary model, which leads to a method that is similar in spirit to a two-stage least squares (2SLS) estimator. Monte Carlo studies and an empirical analysis of timber sale auctions held in Oregon illustrate the usefulness and feasibility of our approach.