Inference in Limited Dependent Variable Models Robust to Weak Identification

24 Pages Posted: 27 Sep 2010

Multiple version iconThere are 2 versions of this paper

Date Written: 2009-11

Abstract

We propose tests for structural parameters in limited dependent variable models with endogenous explanatory variables. These tests are based upon the generalized minimum distance principle. They are of the correct size regardless of whether the structural parameters are identified and are especially appropriate for models whose moment conditions are non-linear in the parameters. Moreover, they are computationally simple, allowing them to be implemented using a large number of statistical software packages. We compare our tests to Wald tests in a simulation experiment and use them to analyse the female labour supply and the demand for cigarettes.

Suggested Citation

Magnusson, Leandro M., Inference in Limited Dependent Variable Models Robust to Weak Identification (2009-11). Econometrics Journal, Vol. 13, Issue 3, pp. S56-S79, October 2010, Available at SSRN: https://ssrn.com/abstract=1681699 or http://dx.doi.org/10.1111/j.1368-423X.2009.00309.x

Leandro M. Magnusson (Contact Author)

University of Western Australia ( email )

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HOME PAGE: http://www.uwa.edu.au/people/Leandro.Magnusson

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