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A cautionary note on tests for overidentifying restrictions

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  • Parente, Paulo M D C
  • Santos Silva, Joao M C

Abstract

Tests of overidentifying restrictions are widely used in practice. However, there is often confusion about the nature of their null hypothesis and about the interpretation of their outcome. In this note we argue that these tests give little information on whether the instruments are correlated with the errors of the underlaying economic model and on whether they identify parameters of interest.

Suggested Citation

  • Parente, Paulo M D C & Santos Silva, Joao M C, 2011. "A cautionary note on tests for overidentifying restrictions," Economics Discussion Papers 3532, University of Essex, Department of Economics.
    • Handle: RePEc:esx:essedp:3532
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    More about this item

    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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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