Graphical diagnostics of endogeneity

Xavier de Luna () and Per Johansson ()
Additional contact information
Xavier de Luna: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 553, Umeå Economic Studies from Umeå University, Department of Economics

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.

Keywords: CUSUM plot; Recursive residuals; Return to schooling; Self selection (search for similar items in EconPapers)
JEL-codes: C32 C52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 2001-02-06

Downloads: (external link)
http://www.econ.umu.se/ues/ues553.pdf (application/pdf)
http://www.econ.umu.se/ues/ues553.pdf.zip (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:hhs:umnees:0553

Access Statistics for this paper

More papers in Umeå Economic Studies from Umeå University, Department of Economics
Address: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Contact information at EDIRC.
Series data maintained by Kjell-Göran Holmberg ().