Tests for Endogeneity and Instrument Suitability

Columbia University Economics Discussion Paper No. 0203-21

40 Pages Posted: 22 Nov 2003

See all articles by Phoebus J. Dhrymes

Phoebus J. Dhrymes

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Date Written: June 2003

Abstract

This paper deals with two alternatives to the so-called Hausman test for the exogeneity of instruments, in the context of a model where one or more explanatory variables are possibly correlated with the structural error. These two alternatives are at least as good or better than the Hausman test and are much simpler to carry out. A small Monte Carlo study illustrates this result.

Keywords: Hausman test, instrumental variables, residual correlation test

JEL Classification: C10, C30, C43

Suggested Citation

Dhrymes, Phoebus J., Tests for Endogeneity and Instrument Suitability (June 2003). Columbia University Economics Discussion Paper No. 0203-21, Available at SSRN: https://ssrn.com/abstract=452940 or http://dx.doi.org/10.2139/ssrn.452940

Phoebus J. Dhrymes (Contact Author)

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