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Misspecification in Simultaneous Systems: An Alternative Test and Its Application to a Model of the Shrimp Market

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  • Lea, J. D.
  • Shonkwiler, J. S.

Abstract

Concern over the effects of public policies based on misspecified econometric models motivates interest in a procedure to test, diagnose, and improve the specification of models that have been estimated with three-stage least squares. A test of system-wide specification based on Hausman's specification test is employed in a test of the a priori restrictions placed on the parameters of a structural model of the U.S. shrimp market. The null hypothesis of proper specification is rejected. After diagnosis via a comparison of unrestricted and restricted reduced forms and respecification, the null hypothesis cannot be rejected.

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  • Lea, J. D. & Shonkwiler, J. S., 1988. "Misspecification in Simultaneous Systems: An Alternative Test and Its Application to a Model of the Shrimp Market," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 20(2), pages 65-72, December.
    • Handle: RePEc:cup:jagaec:v:20:y:1988:i:02:p:65-72_01
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    1. Dhrymes, Phoebus J, 1973. "Restricted and Unrestricted Reduced Forms: Asymptotic Distribution and Relative Efficiency," Econometrica, Econometric Society, vol. 41(1), pages 119-134, January.
    2. Gallant, A. Ronald & Jorgenson, Dale W., 1979. "Statistical inference for a system of simultaneous, non-linear, implicit equations in the context of instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 11(2-3), pages 275-302.
    3. Michael K. Wohlgenant, 1985. "Competitive Storage, Rational Expectations, and Short-Run Food Price Determination," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(4), pages 739-748.
    4. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    5. Kramer, Walter & Sonnberger, Harald, 1986. "Computational pitfalls of the Hausman test," Journal of Economic Dynamics and Control, Elsevier, vol. 10(1-2), pages 163-165, June.
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