University of Surrey

Test tubes in the lab Research in the ATI Dance Research

Testing Exogeneity in Nonparametric Instrumental Variables Models Identified by Conditional Quantile Restrictions

Fu, Jia-Young (Michael), Horowitz, Joel L. and Parey, Matthias (2020) Testing Exogeneity in Nonparametric Instrumental Variables Models Identified by Conditional Quantile Restrictions Econometrics Journal.

[img] Text
FU HOROWITZ PAREY (2020).pdf - Accepted version Manuscript
Restricted to Repository staff only until 12 April 2022.

Download (362kB)
[img] Text (Appendix)
FU HOROWITZ PAREY (2020) Appendix.pdf - Supplemental Material
Restricted to Repository staff only until 12 April 2022.

Download (326kB)

Abstract

This paper presents a test for exogeneity of explanatory variables in a nonparametric instrumental variables (IV) model whose structural function is identified through a conditional quantile restriction. Quantile regression models are increasingly important in applied econometrics. As with mean-regression models, an erroneous assumption that the explanatory variables in a quantile regression model are exogenous can lead to highly misleading results. In addition, a test of exogeneity based on an incorrectly specified parametric model can produce misleading results. This paper presents a test of exogeneity that does not assume the structural function belongs to a known finite-dimensional parametric family and does not require estimation of this function. The latter property is important because nonparametric estimates of the structural function are unavoidably imprecise. The test presented here is consistent whenever the structural function differs from the conditional quantile function on a set of non-zero probability. The test has non-trivial power uniformly over a large class of structural functions that differ from the conditional quantile function by O(n−1/2)⁠. The results of Monte Carlo experiments and an empirical application illustrate the performance of the test.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
NameEmailORCID
Fu, Jia-Young (Michael)
Horowitz, Joel L.
Parey, Matthiasm.parey@surrey.ac.uk
Date : 11 April 2020
DOI : 10.1093/ectj/utaa007
Copyright Disclaimer : © 2020 Royal Economic Society. Published by Oxford University Press. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
Uncontrolled Keywords : Hypothesis test; Instrumental variables; Quantile estimation; Specification testing
Depositing User : James Marshall
Date Deposited : 21 Feb 2020 16:32
Last Modified : 18 May 2020 14:02
URI: http://epubs.surrey.ac.uk/id/eprint/853821

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year


Information about this web site

© The University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom.
+44 (0)1483 300800