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A Test for Endogeneity in Conditional Quantiles

Author

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  • Tae-Hwan Kim

    (School of Economics, Yonsei University - Yonsei University)

  • Christophe Muller

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we develop a test to detect the presence of endogeneity in conditional quantiles. Our test is a Hausman-type test based on the distance between two estimators, of which one is consistent only under no endogeneity while the other is consistent regardless of the presence of endogeneity in conditional quantile models. We derive the asymptotic distribution of the test statistic under the null hypothesis of no endogeneity. The finite sample properties of the test are investigated through Monte Carlo simulations, and it is found that the test shows good size and power properties in finite samples. As opposed to the test based on the IVQR estimator of Chernozhukov and Hansen (2006) in the case of more than a couple of variables, our approach does not imply an infeasible computation time. Finally, we apply our approach to test for endogeneity in conditional quantile models for estimating Engel curves using UK consumption and expenditure data. The pattern of endogeneity in the Engel curve is found to vary substantially across quantiles

Suggested Citation

  • Tae-Hwan Kim & Christophe Muller, 2013. "A Test for Endogeneity in Conditional Quantiles," Working Papers halshs-00854527, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00854527
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00854527
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    1. Thanaset Chevapatrakul & Tae‐Hwan Kim & Paul Mizen, 2009. "The Taylor Principle and Monetary Policy Approaching a Zero Bound on Nominal Rates: Quantile Regression Results for the United States and Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(8), pages 1705-1723, December.
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    Cited by:

    1. Muller, Christophe, 2018. "Heterogeneity and nonconstant effect in two-stage quantile regression," Econometrics and Statistics, Elsevier, vol. 8(C), pages 3-12.
    2. Federico Favata & Sofia Zamparo, 2021. "Estimación del efecto de la segregación ocupacional por sexo en el ingreso laboral para Argentina (2016-2020)," Asociación Argentina de Economía Política: Working Papers 4467, Asociación Argentina de Economía Política.
    3. Jamal Bouoiyour & Amal Miftah & Refk Selmi, 2019. "The economic contribution of immigration on Europe: Fresh evidence from a “hybrid” quantile regression model," Working Papers hal-02346700, HAL.
    4. B. Fernández-Olit & C. Ruza & M. Cuesta-González & M. Matilla-Garcia, 2019. "Banks and Financial Discrimination: What Can Be Learnt from the Spanish Experience?," Journal of Consumer Policy, Springer, vol. 42(2), pages 303-323, June.

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    Keywords

    Hausman test; Engel curve; regression quantile; endogeneity; two-stage estimation;
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