Testing for partial exogeneity with weak identification

Firmin Doko Tchatoka

No 14565, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: We consider the following problem. A structural equation of interest contains two sets of explanatory variables which economic theory predicts may be endogenous. The researcher is interesting in testing the exogeneity of only one of them. Standard exogeneity tests are in general unreliable from the view point of size control to assess such a problem. We develop four alternative tests to address this issue in a convenient way. We provide a characterization of their distributions under both the null hypothesis (level) and the alternative hypothesis (power), with or without identification. We show that the usual 2 critical values are still applicable even when identification is weak. So, all proposed tests can be described as robust to weak instruments. We also show that test consistency may still hold even if the overall identification fails, provided partial identification is satisfied. We present a Monte Carlo experiment which confirms our theory. We illustrate our theory with the widely considered returns to education example. The results underscore: (1) how the use of standard tests to assess partial exogeneity hypotheses may be misleading, and (2) the relevance of using our procedures when checking for partial exogeneity.

Keywords: Subset of endogenous regressors; Generated structural equation; Robustness to weak identification; Consistency. (search for similar items in EconPapers)
JEL-codes: C12 C15 C3 C52 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-05-31, Revised 2012-05-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published by the University of Tasmania. Discussion paper 2012-02

Downloads: (external link)
http://eprints.utas.edu.au/14565/1/2012-02__DP_Doko.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://eprints.utas.edu.au/14565/1/2012-02__DP_Doko.pdf [302 Moved Temporarily]--> https://eprints.utas.edu.au/14565/1/2012-02__DP_Doko.pdf [302 Found]--> https://figshare.utas.edu.au/ndownloader/files/41152562 [302 Found]--> https://s3-ap-southeast-2.amazonaws.com/figshare-production-eu-utas-storage2718-ap-southeast-2/41152562/201202__DP_Doko.pdf?X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIARRFKZQ25CRVZALJA/20250410/ap-southeast-2/s3/aws4_request&X-Amz-Date=20250410T133119Z&X-Amz-Expires=10&X-Amz-SignedHeaders=host&X-Amz-Signature=d481845c147ad5ddd4f4710ee591c52edce6ed04e616c5c0573fe10ffc1b6a68)

Related works:
Working Paper: Testing for partial exogeneity with weak identification (2012)
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:tas:wpaper:14565

Access Statistics for this paper

More papers in Working Papers from University of Tasmania, Tasmanian School of Business and Economics Contact information at EDIRC.
Bibliographic data for series maintained by Oscar Pavlov ().