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A nonparametric test of exogeneity

Blundell, R.; Horowitz, J.; (2004) A nonparametric test of exogeneity. (cemmap Working Papers CWP15/). Institute for Fiscal Studies: London, UK. Green open access

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This paper is concerned with inference about a function g that is identified by a conditional moment restriction involving instrumental variables. The function is nonparametric. It satisfies mild regularity conditions but is otherwise unknown. The paper presents test of the hypothesis that g is the mean of a random variable Y conditional on a covariate X. The need to test this hypothesis arises frequently in economics. The test does not require nonparametric instrumental-variables (IV) estimation of g and is not subject to the ill-posed inverse problem that nonparametric IV estimation entails. The test is consistent whenever g differs from the conditional mean function of Y on a set of non-zero probability. Moreover, the power of the test is arbitrarily close to 1 uniformly over a set of functions g whose distance from the conditional mean function is O(n^{-1/2}) where n is the sample size.

Type: Working / discussion paper
Title: A nonparametric test of exogeneity
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.cemmap.ac.uk/publications.php?publicati...
Language: English
Keywords: Hypothesis test, instrumental variables, specification testing, consistent testing
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/14690
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