Hausman Tests for Inefficient Estimators: Application to Demand for Health Care Service (revised)

Michael Creel ()
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Michael Creel: http://pareto.uab.es/mcreel

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: The Hausman (1978) test is based on the vector of differences of two estimators. It is usually assumed that one of the estimators is fully efficient, since this simplifies calculation of the test statistic. However, this assumption limits the applicability of the test, since widely used estimators such as the generalized method of moments (GMM) or quasi maximum likelihood (QML) are often not fully efficient. This paper shows that the test may easily be implemented, using well-known methods, when neither estimator is efficient. To illustrate, we present both simulation results as well as empirical results for utilization of health care services.

Keywords: Hausman test; specification testing; health care utilization (search for similar items in EconPapers)
JEL-codes: C12 C52 I10 (search for similar items in EconPapers)
Pages: 19
Date: 2002-04-16
New Economics Papers: this item is included in nep-ecm and nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:509.02

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