Nonparametric Specification Testing in Random Parameter Models

Christoph Breunig and Stefan Hoderlein
Additional contact information
Christoph Breunig: Humboldt-Universität zu Berlin

No 897, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: In this paper, we suggest and analyze a new class of specification tests for random coefficient models. These tests allow to assess the validity of central structural features of the model, in particular linearity in coefficients and generalizations of this notion like a known nonlinear functional relationship. They also allow to test for degeneracy of the distribution of a random coefficient, i.e., whether a coefficient is fixed or random, including whether an associated variable can be omitted altogether. Our tests are nonparametric in nature, and use sieve estimators of the characteristic function. We analyze their power against both global and local alternatives in large samples and through a Monte Carlo simulation study. Finally, we apply our framework to analyze the specification in a heterogeneous random coefficients consumer demand model.

Keywords: Nonparametric specification testing; random coefficients; unobserved heterogeneity; sieve method; characteristic function; consumer demand (search for similar items in EconPapers)
JEL-codes: C12 C14 (search for similar items in EconPapers)
Date: 2016-02-07
New Economics Papers: this item is included in nep-ecm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp897.pdf main text (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: https://EconPapers.repec.org/RePEc:boc:bocoec:897

Access Statistics for this paper

More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().