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Graphical diagnostics of endogeneity

Author

Listed:
  • de Luna, Xavier

    () (Department of Economics, Umeå University)

  • Johansson, Per

    () (Office of Labour Market Policy Evaluation)

Abstract

We show that in sorting cross-sectional data, the endogeneity of a variable may be successfully detected by graphically examining the cumulative sum of the recursive residuals. An interesting case arises with a continuous or ordered (e.g., years of schooling) endogenous variable. Then, a graphical test for misspecification due to endogeneity (e.g., self selection) can be obtained without instrumental variables. Moreover, the sign of the bias implied by this endogeneity becomes deducible through such graphs.

Suggested Citation

  • de Luna, Xavier & Johansson, Per, 2001. "Graphical diagnostics of endogeneity," Umeå Economic Studies 553, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0553
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    Cited by:

    1. de Luna, Xavier & Johansson, Per, 2006. "Exogeneity in structural equation models," Journal of Econometrics, Elsevier, vol. 132(2), pages 527-543, June.
    2. Fernandez-Leiceaga, Xoaquin & Lago-Peñas, Santiago & Sánchez, Patricio, 2013. "¿Ha contribuido la población inmigrante a la convergencia interregional en España?
      [On the contribution of immigrants to interregional convergence in Spain]
      ," MPRA Paper 52381, University Library of Munich, Germany.
    3. José Caamaño-Alegre & Santiago Lago-Peñas & Francisco Reyes-Santias & Aurora Santiago-Boubeta, 2011. "Budget Transparency in Local Governments: An Empirical Analysis," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1102, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

    More about this item

    Keywords

    CUSUM plot; Recursive residuals; Return to schooling; Self selection;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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