Graphical diagnostics of endogeneity
AbstractWe show that in sorting cross-sectional data, the endogeneity of a variable may be successfully detected by graphically examining the cumulative sum of the recursive residuals. An interesting case arises with a continuous or ordered (e.g., years of schooling) endogenous variable. Then, a graphical test for misspecification due to endogeneity (e.g., self selection) can be obtained without instrumental variables. Moreover, the sign of the bias implied by this endogeneity becomes deducible through such graphs.
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Bibliographic InfoPaper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 553.
Length: 21 pages
Date of creation: 06 Feb 2001
Date of revision:
Contact details of provider:
Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
Web page: http://www.econ.umu.se/
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CUSUM plot; Recursive residuals; Return to schooling; Self selection;
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