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Tests of Independence in Separable Econometric Models: Theory and Application

Author

Listed:
  • Donald J. Brown

    (Economic Growth Center, Yale University)

  • Rahul Deb

    (Yale University)

  • Marten H. Wegkamp

    (Florida State University)

Abstract

A common stochastic restriction in econometric models separable in the latent variables is the assumption of stochastic independence between the unobserved and observed exogenous variables. Both simple and composite tests of this assumption are derived from properties of independence empirical processes and the consistency of these tests is established. As an application, we stimulate estimation of a random quasilinear utility function, where we apply our tests of independence.

Suggested Citation

  • Donald J. Brown & Rahul Deb & Marten H. Wegkamp, 2006. "Tests of Independence in Separable Econometric Models: Theory and Application," Working Papers 946, Economic Growth Center, Yale University.
    • Handle: RePEc:egc:wpaper:946
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    File URL: http://www.econ.yale.edu/growth_pdf/cdp946.pdf
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    Cited by:

    1. Feng, Junlong & Lee, Sokbae, 2025. "Individual welfare analysis: Random quasilinear utility, independence, and confidence bounds," Journal of Econometrics, Elsevier, vol. 247(C).
    2. Richard Blundell & Dennis Kristensen & Rosa Matzkin, 2017. "Individual counterfactuals with multidimensional unobserved heterogeneity," CeMMAP working papers CWP60/17, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    3. Du, Zaichao, 2014. "Testing for serial independence of panel errors," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 248-261.
    4. Zaichao Du, 2016. "Nonparametric bootstrap tests for independence of generalized errors," Econometrics Journal, Royal Economic Society, vol. 19(1), pages 55-83, February.

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    Keywords

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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