Unobserved Heterogeneity or Measurement Errors? Testing for Correlated Effects with Measurement Errors *
Oxford Bulletin of Economics and Statistics, 2007, vol. 69, issue 6, 867-880
This paper addresses the problem of endogenous regressors due to the presence of unobserved heterogeneity, when this is correlated with the regressors, and caused by regressors’ measurement errors. A simple two‐stage testing procedure is proposed for the identification of the underlying cause of correlation between regressors and the error term. The statistical performance of the resulting sequential test is assessed using simulated data.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:obuest:v:69:y:2007:i:6:p:867-880
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Oxford Bulletin of Economics and Statistics is currently edited by Christopher Adam, Anindya Banerjee, Christopher Bowdler, David Hendry, Adriaan Kalwij, John Knight and Jonathan Temple
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