Testing for separability in structural equations

Xun Lu and Halbert White

Journal of Econometrics, 2014, vol. 182, issue 1, 14-26

Abstract: Separability is an important feature of structural equations, as it implies the absence of unobservable heterogeneity of effects and has significant implications for identification and efficiency of estimation. This paper provides a nonparametric test for separability in structural equations. The test is based on a conditional independence test recently developed by Huang et al. (2013), building on consistent procedures of Bierens (1982, 1990) and Stinchcombe and White (1998). The test is easy to implement and achieves n local power. We apply our test to study interest rate elasticities of loan demand in microfinance and the impact of education on wages.

Keywords: Nonparametric test; Specification test; Separability; Heterogeneity; Conditional exogeneity; Treatment effects (search for similar items in EconPapers)
JEL-codes: C12 C14 C31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:182:y:2014:i:1:p:14-26

DOI: 10.1016/j.jeconom.2014.04.005

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