Joel Horowitz () (Institute for Fiscal Studies and Northwestern University) Sokbae 'Simon' Lee () (Institute for Fiscal Studies and University College London)
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This paper is concerned with inference about a function g that is identified by a conditional quantile restriction involving instrumental variables. The paper presents a test of the hypothesis that g belongs to a finite-dimensional parametric family against a nonparametric alternative. The test is not subject to the ill-posed inverse problem of nonparametric instrumental variables estimation. Under mild conditions, the test is consistent against any alternative model. In large samples, its power is arbitrarily close to 1 uniformly over a class of alternatives whose distance from the null hypothesis is O (n1/2), where n is the sample size. Monte Carlo simulations illustrate the finite-sample performance of the test.
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Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number
CWP02/07.
Length: 35 pp. Date of creation: Feb 2007 Date of revision: Handle: RePEc:ifs:cemmap:02/07
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Find related papers by JEL classification: C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
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