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Exogeneity in semiparametric moment condition models

Author

Listed:
  • Paulo Parente

    (Institute for Fiscal Studies)

  • Richard Smith

    (Institute for Fiscal Studies and University of Cambridge)

Abstract

The primary concern of this article is the provision of de finitions and tests for exogeneity appropriate for models defi ned through sets of conditional moment restrictions. These forms of exogeneity are expressed as additional conditional moment constraints and may be equivalently formulated as a countably infi nite number of unconditional restrictions. Consequently, tests of exogeneity may be seen as tests for an additional set of infinite moment conditions. A number of test statistics are suggested based on GMM and generalised empirical likelihood. The asymptotic properties of the statistics are described under both null hypothesis and a suitable sequence of local alternatives. An extensive set of simulation experiments explores the relative practical efficacy of the various test statistics in terms of empirical size and size-adjusted power.

Suggested Citation

  • Paulo Parente & Richard Smith, 2012. "Exogeneity in semiparametric moment condition models," CeMMAP working papers CWP30/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:30/12
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    File URL: http://www.cemmap.ac.uk/wps/cwp301212.pdf
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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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