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A cautionary note on tests for overidentifying restrictions

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

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Abstract

Tests of overidentifying restrictions are widely used in practice. However, there is often confusion about the nature of their null hypothesis and about the interpretation of their outcome. In this note we argue that these tests give little information on whether the instruments are correlated with the errors of the underlaying economic model and on whether they identify parameters of interest.

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Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 699.

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Date of creation: 11 Nov 2011
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Handle: RePEc:esx:essedp:699

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  1. 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.
  2. Helena Holmlund & Mikael Lindahl & Erik Plug, 2010. "The Causal Effect of Parents' Schooling on Children's Schooling - A Comparison of Estimation Methods," CESifo Working Paper Series 3234, CESifo Group Munich.
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  7. 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.
  8. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  9. 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.
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  14. repec:ebl:ecbull:v:3:y:2008:i:76:p:1-9 is not listed on IDEAS
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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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