Detecting neglected parameter heterogeneity with Chow tests
AbstractThe paper demonstrates through a number of Monte Carlo experiments that, for the type of cross-section data sets typically encountered in applied economics, Chow tests on sorted variations of the data matrix can detect neglected parameter heterogeneity. The paper focuses on heterogeneity in the behavioural responses of economic actors that belong to different economically meaningful groups, such as the young, middle-aged, and old. Since the suggested methodology is easy to implement yet powerful, its routine use by applied economists would be desirable given the very significant estimation bias that can result from neglecting parameter heterogeneity.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 13 (2006)
Issue (Month): 6 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAEL20
Other versions of this item:
- Joachim Zietz, 2005. "Detecting Neglected Parameter Heterogeneity with Chow Tests," Working Papers 200503, Middle Tennessee State University, Department of Economics and Finance.
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Les Godfrey & Chris Orme, .
"The Sensitivity of some General Checks to Omitted Variables in the Linear Model,"
92/3, Department of Economics, University of York.
- Godfrey, L G & Orme, C D, 1994. "The Sensitivity of Some General Checks to Omitted Variables in the Linear Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 489-506, May.
- Hall, A.R., 1984.
"The Information Matrix Test for the Linear Model,"
The Warwick Economics Research Paper Series (TWERPS)
250, University of Warwick, Department of Economics.
- Chesher, Andrew D, 1984. "Testing for Neglected Heterogeneity," Econometrica, Econometric Society, vol. 52(4), pages 865-72, July.
- Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
- Brock, William A & Durlauf, Steven N, 2001.
"Discrete Choice with Social Interactions,"
Review of Economic Studies,
Wiley Blackwell, vol. 68(2), pages 235-60, April.
- Russell Davidson & James G. MacKinnon, 1988.
"A New Form of the Information Matrix Test,"
724, Queen's University, Department of Economics.
- Thursby, Jerry G., 1992. "A comparison of several exact and approximate tests for structural shift under heteroscedasticity," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 363-386.
- White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Chesher, Andrew & Spady, Richard, 1991. "Asymptotic Expansions of the Information Matrix Test Statistic," Econometrica, Econometric Society, vol. 59(3), pages 787-815, May.
- Zietz, Joachim, 2001. " Heteroskedasticity and Neglected Parameter Heterogeneity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 263-73, May.
- Isaksson, Ann-Sofie, 2008.
"Social divisions and institutions: Assessing institutional parameter variation,"
Working Papers in Economics
282, University of Gothenburg, Department of Economics, revised 01 Aug 2008.
- Ann-Sofie Isaksson, 2011. "Social divisions and institutions: assessing institutional parameter variation," Public Choice, Springer, vol. 147(3), pages 331-357, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.