Overidentification Tests with Grouped Data

27 Pages Posted: 19 Jul 2000 Last revised: 13 Aug 2010

See all articles by Caroline M. Hoxby

Caroline M. Hoxby

Stanford University; National Bureau of Economic Research (NBER); Hoover Institution; Stanford University

M. Daniele Paserman

Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: February 1998

Abstract

This paper examines the validity of overidentification tests and exogeneity tests in the presence of grouped data. We find that even a small intra-group correlation, when instruments do not vary within groups, may generate a substantial bias in the standard overidentification tests described in textbooks.

Suggested Citation

Hoxby, Caroline M. and Paserman, M. Daniele, Overidentification Tests with Grouped Data (February 1998). NBER Working Paper No. t0223, Available at SSRN: https://ssrn.com/abstract=226633

Caroline M. Hoxby (Contact Author)

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M. Daniele Paserman

Hebrew University of Jerusalem - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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