Non-Normal Errors and the Distribution of OLS and 2SLS Structural Estimators

This paper examines the sensitivity of the distributions of OLS and 2SLS estimators to the assumption of normality of disturbances in a structural equation with two included endogenous variables. The approach taken is that ofimposing Edgeworth distributed errors on the reduced form equations and deriving the pdf of the estimators via the technique of Davis [11]. The sensitivity of the pdf s to changes in the non-normality parameters, i.e., skewness and kurtosis i s examined via extensive numerical computations.