Testing for Monotonicity under Endogeneity An Application to the Reservation Wage Function
This paper develops a test for monotonicity of nonparametric regression models under endogeneity, which in its generality is novel in the literature.� The test statistic, which is built upon a second order U-process, introduces 'correction terms' based on control functions that purge the endogeneity.� The test has a non-standard asymptotic distribution from which asymptotic critical values can directly be derived.� Furthermore, the test statistic is extended to accommodate multivariate (exogenous) regressors.� Consistency against general alternatives is proved and the test's finite sample properties are examined in a Monte Carlo experiment.� The test is used to formally assess the monotonicity of the reservation wage as a declining function of elapsed unemployment duration.� This relationship is difficult to measure due to the simultaneity of both variables.� Preliminary results indicate that reservation wage functions do in fact not decline monotonically.
|Date of creation:||18 Sep 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.economics.ox.ac.uk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Glenn Ellison & Sara Fisher Ellison, 2007.
"Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration,"
NBER Working Papers
13069, National Bureau of Economic Research, Inc.
- Glenn Ellison & Sara Fisher Ellison, 2011. "Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 1-36, February.
- KIEFER, Nicholas M. & NEUMANN, George R., .
"An empirical job-search model, with a test of the constant reservation-wage hypothesis,"
CORE Discussion Papers RP
-358, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kiefer, Nicholas M & Neumann, George R, 1979. "An Empirical Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 89-107, February.
- Addison, John T. & Centeno, Mario & Portugal, Pedro, 2004.
"Reservation Wages, Search Duration, and Accepted Wages in Europe,"
IZA Discussion Papers
1252, Institute for the Study of Labor (IZA).
- John T. Addison & Mário Centeno & Pedro Portugal, 2004. "Reservation Wages, Search Duration, and Accepted Wages in Europe," Working Papers w200413, Banco de Portugal, Economics and Research Department.
- Sokbae Lee & Oliver Linton & Yoon-Jae Whang, 2009.
"Testing for Stochastic Monotonicity,"
Econometric Society, vol. 77(2), pages 585-602, 03.
- Sokbae Lee & Oliver Linton & Yoon-Jae Whang, 2006. "Testing for stochastic monotonicity," LSE Research Online Documents on Economics 4425, London School of Economics and Political Science, LSE Library.
- Sokbae Lee & Oliver Linton & Yoon-Jae Whang, 2006. "Testing For Stochasticmonotonicity," STICERD - Econometrics Paper Series /2006/504, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Sokbae 'Simon' Lee & Oliver Linton & Yoon-Jae Whang, 2008. "Testing for stochastic monotonicity," CeMMAP working papers CWP21/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Smith, Jennifer, 2010.
"The Ins and Outs of UK Unemployment,"
The Warwick Economics Research Paper Series (TWERPS)
944, University of Warwick, Department of Economics.
- Ahn, Hyungtaik & Powell, James L., 1993. "Semiparametric estimation of censored selection models with a nonparametric selection mechanism," Journal of Econometrics, Elsevier, vol. 58(1-2), pages 3-29, July.
- Fermanian, Jean-David & Salani , Bernard, 2004. "A Nonparametric Simulated Maximum Likelihood Estimation Method," Econometric Theory, Cambridge University Press, vol. 20(04), pages 701-734, August.
- Richard Blundell & Rosa Matzkin, 2010. "Conditions for the existence of control functions in nonseparable simultaneous equations models," CeMMAP working papers CWP28/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
- Sarah Brown & Karl Taylor, .
"Reservation Wages, Expected wages and the duration of Unemployment: evidence from British Panel data,"
2009001, The University of Sheffield, Department of Economics.
- Brown, Sarah & Taylor, Karl, 2009. "Reservation Wages, Expected Wages and the Duration of Unemployment: Evidence from British Panel Data," IZA Discussion Papers 3981, Institute for the Study of Labor (IZA).
- Whitney K. Newey & James L. Powell & Francis Vella, 1998.
"Nonparametric Estimation of Triangular Simultaneous Equations Models,"
98-6, Massachusetts Institute of Technology (MIT), Department of Economics.
- Whitney K. Newey & James L. Powell & Francis Vella, 1999. "Nonparametric Estimation of Triangular Simultaneous Equations Models," Econometrica, Econometric Society, vol. 67(3), pages 565-604, May.
- Whitney Newey & James Powell & Francis Vella, 1998. "Nonparametric Estimation of Triangular Simultaneous Equations Models," Working papers 98-16, Massachusetts Institute of Technology (MIT), Department of Economics.
- Delgado, Miguel A. & Escanciano, Juan Carlos, 2012. "Distribution-free tests of stochastic monotonicity," Journal of Econometrics, Elsevier, vol. 170(1), pages 68-75.
- Durot, Cécile, 2003. "A Kolmogorov-type test for monotonicity of regression," Statistics & Probability Letters, Elsevier, vol. 63(4), pages 425-433, July.
- Lancaster, Tony, 1985. "Simultaneous equations models in applied search theory," Journal of Econometrics, Elsevier, vol. 28(1), pages 113-126, April.
- van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 255-77, April.
- Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:673. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise)
If references are entirely missing, you can add them using this form.