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Inference in Limited Dependent Variable Models Robust to Weak Identification

Author

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  • Leandro M. Magnusson

    () (Department of Economics, Tulane University)

Abstract

We propose tests for structural parameters in limited dependent variable models with endogenous explanatory variables using the classical minimum distance framework. These tests have the correct size whether the structural parameters are identified or not. Relating to the current tests, the application of ours is appropriate especially to models whose moment conditions are nonlinear in parameters. Moreover, the computation of ours tests is simple, allowing their implementation in a large number of statistical software packages. We compare our tests with Wald tests by performing simulation experiments. We use our tests to analyze the female labor supply and the demand for cigarette.

Suggested Citation

  • Leandro M. Magnusson, 2008. "Inference in Limited Dependent Variable Models Robust to Weak Identification," Working Papers 0801, Tulane University, Department of Economics, revised Apr 2009.
  • Handle: RePEc:tul:wpaper:0801
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    References listed on IDEAS

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    1. Sbordone, Argia M., 2005. "Do expected future marginal costs drive inflation dynamics?," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1183-1197, September.
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    Cited by:

    1. Jean-Marie Dufour & Joachim Wilde, 2013. "Weak Identification in Probit Models with Endogenous Covariates," Working Papers 95, Institute of Empirical Economic Research, Osnabrueck University, revised 28 Feb 2013.
    2. Lanz, Bruno & Provins, Allan, 2017. "Using averting expenditures to estimate the demand for public goods: Combining objective and perceived quality," Resource and Energy Economics, Elsevier, vol. 47(C), pages 20-35.
    3. Bruno Lanz, 2015. "Avertive expenditures, endogenous quality perception, and the demand for public goods: An instrumental variable approach," CIES Research Paper series 36-2015, Centre for International Environmental Studies, The Graduate Institute.
    4. repec:gii:ciesrp:cies_rp_36rev is not listed on IDEAS
    5. M. Shahe Emran & Fenohasina Maret-Rakotondrazaka & Stephen C. Smith, 2014. "Education and Freedom of Choice: Evidence from Arranged Marriages in Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 50(4), pages 481-501, April.
    6. repec:eee:pubeco:v:153:y:2017:i:c:p:32-48 is not listed on IDEAS
    7. Wendy Correa Martínez & Michael Jetter, 2016. "Isolating causality between gender and corruption: An IV approach," DOCUMENTOS DE TRABAJO CIEF 014438, UNIVERSIDAD EAFIT.
    8. Antonio Diez de Los Rios, 2015. "A New Linear Estimator for Gaussian Dynamic Term Structure Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(2), pages 282-295, April.

    More about this item

    Keywords

    weak identification; minimum chi-square estimation; hypothesis testing; limited dependent variable models;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

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