Hahn-Hausman test as a specification test |
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Authors: | Yoonseok Lee Ryo Okui |
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Institution: | a Department of Economics, University of Michigan, 611 Tappan Street, Ann Arbor, MI 48109-1220, USAb Institute of Economic Research, Kyoto University, Yoshida-Hommachi, Sakyo, Kyoto, Kyoto, 606-8501, Japan |
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Abstract: | This paper develops a modified version of the Sargan Sargan, J.D., 1958. The estimation of economic relationships using instrumental variables. Econometrica 26 (3), 393-415] restrictions, and shows that it is numerically equivalent to the test statistic of Hahn and Hausman Hahn, J., Hausman, J., 2002. A new specification test for the validity of instrumental variables. Econometrica 70 (1), 163-189] up to a sign. The modified Sargan test is constructed such that its asymptotic distribution under the null hypothesis of correct specification is standard normal when the number of instruments increases with the sample size. The equivalence result is useful in understanding what the Hahn-Hausman test detects and its power properties. |
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Keywords: | C12 C21 |
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