Testing a parametric quantile-regression model with an endogenous explanatory variable against a nonparametric alternative

Joel L. Horowitz () and Sokbae (Simon) Lee
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Joel L. Horowitz: Institute for Fiscal Studies and Northwestern University

No CWP02/07, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract:

This paper is concerned with inference about a function g that is identified by a conditional quantile restriction involving instrumental variables. The paper presents a test of the hypothesis that g belongs to a finite-dimensional parametric family against a nonparametric alternative. The test is not subject to the ill-posed inverse problem of nonparametric instrumental variables estimation. Under mild conditions, the test is consistent against any alternative model. In large samples, its power is arbitrarily close to 1 uniformly over a class of alternatives whose distance from the null hypothesis is O ( n 1/2 ), where n is the sample size. Monte Carlo simulations illustrate the finite-sample performance of the test.

Keywords: Hypothesis test; quantile estimation; instrumental variables; specification (search for similar items in EconPapers)
JEL-codes: C12 C14 (search for similar items in EconPapers)
Pages: 35 pp.
Date: 2007-02-01
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http://cemmap.ifs.org.uk/wps/cwp0702.pdf (application/pdf)

Related works:
Journal Article: Testing a parametric quantile-regression model with an endogenous explanatory variable against a nonparametric alternative (2009)
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