Horowitz, JL; Lee, S; (2009) Testing a parametric quantile-regression model with an endogenous explanatory variable against a nonparametric alternative. J ECONOMETRICS , 152 (2) 141 - 152. 10.1016/j.jeconom.2009.01.003.

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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 variable 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 proportional to n(-1/2), where it is the sample size. Monte Carlo simulations illustrate the finite-sample performance of the test. (C) 2009 Elsevier B.V. All rights reserved.

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