A Simple Specification Test for Models with Many Conditional Moment Inequalities

Mathieu Marcoux, Thomas Russell and Yuanyuan Wan

Working Papers from University of Toronto, Department of Economics

Abstract: This paper proposes a simple specification test for partially identified models with a large or possibly uncountably infinite number of conditional moment (in)equalities. The approach is valid under weak assumptions, allowing for both weak identification and non-differentiable moment conditions. Computational simplifications are obtained by reusing certain expensive-to-compute components of the test statistic when constructing the critical values. Because of the weak assumptions, the procedure faces a new set of interesting theoretical issues which we show can be addressed by an unconventional sample-splitting procedure that runs multiple tests of the same null hypothesis. The resulting specification test controls size uniformly over a large class of data generating processes, has power tending to 1 for fixed alternatives, and has power against certain local alternatives which we characterize. Finally, the testing procedure is demonstrated in three simulation exercises.

Keywords: Misspecification; Moment Inequality; Partial identification; Specification Testing (search for similar items in EconPapers)
JEL-codes: C12 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2023-11-14
New Economics Papers: this item is included in nep-ecm
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Journal Article: A simple specification test for models with many conditional moment inequalities (2024)
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