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A cautionary note on tests of overidentifying restrictions

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  • Parente, Paulo M.D.C.
  • Santos Silva, J.M.C.

Abstract

In this note, we argue that tests of overidentifying restrictions give little information on the validity of the moment conditions implied by the underlying economic model, and therefore are mute about the possibility of identifying the parameters of interest.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 115 (2012)
Issue (Month): 2 ()
Pages: 314-317

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Handle: RePEc:eee:ecolet:v:115:y:2012:i:2:p:314-317

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: GMM; Hansen’s J-test; Instrumental variables; Sargan test;

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  1. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 111-132, Fall.
  2. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March.
  3. Hall, Alastair R., 2004. "Generalized Method of Moments," OUP Catalogue, Oxford University Press, number 9780198775201.
  4. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
  5. repec:ebl:ecbull:v:3:y:2008:i:76:p:1-9 is not listed on IDEAS
  6. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  7. Hall, Alastair R. & Pelletier, Denis, 2011. "Nonnested Testing In Models Estimated Via Generalized Method Of Moments," Econometric Theory, Cambridge University Press, vol. 27(02), pages 443-456, April.
  8. Angrist, Joshua D & Graddy, Kathryn & Imbens, Guido W, 2000. "The Interpretation of Instrumental Variables Estimators in Simultaneous Equations Models with an Application to the Demand for Fish," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 499-527, July.
  9. Helena Holmlund & Mikael Lindahl & Erik Plug, 2011. "The Causal Effect of Parents' Schooling on Children's Schooling: A Comparison of Estimation Methods," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 615-51, September.
  10. Jeffrey M. Wooldridge, 2001. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232197, January.
  11. Angus Deaton, 2010. "Instruments, randomization, and learning about development," Working Papers 1224, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  12. Ichino, Andrea & Winter-Ebmer, Rudolf, 1999. "Lower and upper bounds of returns to schooling: An exercise in IV estimation with different instruments," European Economic Review, Elsevier, vol. 43(4-6), pages 889-901, April.
  13. Hall, Alastair R. & Inoue, Atsushi, 2003. "The large sample behaviour of the generalized method of moments estimator in misspecified models," Journal of Econometrics, Elsevier, vol. 114(2), pages 361-394, June.
  14. Rembert De Blander, 2008. "Which null hypothesis do overidentification restrictions actually test?," Economics Bulletin, AccessEcon, vol. 3(76), pages 1-9.
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Cited by:
  1. Ciani, Emanuele, 2012. "Informal adult care and caregivers' employment in Europe," Labour Economics, Elsevier, vol. 19(2), pages 155-164.

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