Testing for IIA with the Hausman-McFadden Test
AbstractThe Independence of Irrelevant Alternatives assumption inherent in multinomial logit models is most frequently tested with a Hausman-McFadden test. As is confirmed by many findings in the literature, this test sometimes produces negative outcomes, in contradiction of its asymptotic χÂ² distribution. This problem is caused by the use of an improper variance matrix and may lead to an invalid statistical inference even when the test value is positive. With a correct specification of the variance, the sampling distribution for small samples is indeed close to a χÂ² distribution.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5826.
Length: 52 pages
Date of creation: Jun 2011
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Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
- NEP-DCM-2011-07-13 (Discrete Choice Models)
- NEP-ECM-2011-07-13 (Econometrics)
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