Tests of Hypotheses Arising in the Correlated Random Coefficient Model

42 Pages Posted: 4 Oct 2010

See all articles by James J. Heckman

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Daniel Schmierer

University of Chicago - Department of Economics

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Abstract

This paper examines the correlated random coefficient model. It extends the analysis of Swamy (1971, 1974), who pioneered the uncorrelated random coefficient model in economics. We develop the properties of the correlated random coefficient model and derive a new representation of the variance of the instrumental variable estimator for that model. We develop tests of the validity of the correlated random coefficient model against the null hypothesis of the uncorrelated random coefficient model.

Keywords: correlated random coefficient models, instrumental variables

JEL Classification: C31

Suggested Citation

Heckman, James J. and Schmierer, Daniel, Tests of Hypotheses Arising in the Correlated Random Coefficient Model. IZA Discussion Paper No. 5205, Available at SSRN: https://ssrn.com/abstract=1686496 or http://dx.doi.org/10.2139/ssrn.1686496

James J. Heckman (Contact Author)

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Daniel Schmierer

University of Chicago - Department of Economics ( email )

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United States

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