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Inference in Limited Dependent Variable Models Robust to Weak Identification

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  • Leandro M. Magnusson

    ()
    (Department of Economics, Tulane University)

Abstract

We propose tests for structural parameters in limited dependent variable models with endogenous explanatory variables using the classical minimum distance framework. These tests have the correct size whether the structural parameters are identified or not. Relating to the current tests, the application of ours is appropriate especially to models whose moment conditions are nonlinear in parameters. Moreover, the computation of ours tests is simple, allowing their implementation in a large number of statistical software packages. We compare our tests with Wald tests by performing simulation experiments. We use our tests to analyze the female labor supply and the demand for cigarette.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul0801.pdf
File Function: First version, 2008
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File URL: http://econ.tulane.edu/RePEc/pdf/tul0801r1.pdf
File Function: Revised version, 2009
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 0801.

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Length: 31 pages
Date of creation: Sep 2008
Date of revision: Apr 2009
Handle: RePEc:tul:wpaper:0801

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Keywords: weak identification; minimum chi-square estimation; hypothesis testing; limited dependent variable models;

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References

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  10. Frank Kleibergen, 2001. "Testing Parameters in GMM without Assuming that they are identified," Tinbergen Institute Discussion Papers 01-067/4, Tinbergen Institute.
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  16. Thomas Mroz, . "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," University of Chicago - Population Research Center 84-8, Chicago - Population Research Center.
  17. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
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Cited by:
  1. Emran, M. Shahe & Maret-Rakotondrazaka, Fenohasina & Smith, Stephen C., 2012. "Education and Freedom of Choice: Evidence from Arranged Marriages in Vietnam," IZA Discussion Papers 6862, Institute for the Study of Labor (IZA).
  2. Jean-Marie Dufour & Joachim Wilde, 2013. "Weak Identification in Probit Models with Endogenous Covariates," Working Papers 95, Institute of Empirical Economic Research, revised 28 Feb 2013.
  3. Antonio Diez de los Rios, 2013. "A New Linear Estimator for Gaussian Dynamic Term Structure Models," Working Papers 13-10, Bank of Canada.

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