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A Non-Parametric Test of Exogeneity

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  • Richard Blundell
  • Joel L. Horowitz

Abstract

This paper presents a test for exogeneity of explanatory variables that minimizes the need for auxiliary assumptions that are not required by the definition of exogeneity. It concerns inference about a non-parametric function g that is identified by a conditional moment restriction involving instrumental variables (IV). A test of the hypothesis that g is the mean of a random variable Y conditional on a covariate X is developed that is not subject to the ill-posed inverse problem of non-parametric IV estimation. The test is consistent whenever g differs from E (Y ∣ X) on a set of non-zero probability. The usefulness of this new exogeneity test is displayed through Monte Carlo experiments and an application to estimation of non-parametric consumer expansion paths. Copyright 2007, Wiley-Blackwell.

Suggested Citation

  • Richard Blundell & Joel L. Horowitz, 2007. "A Non-Parametric Test of Exogeneity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(4), pages 1035-1058.
    • Handle: RePEc:oup:restud:v:74:y:2007:i:4:p:1035-1058
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2007.00458.x
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    References listed on IDEAS

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