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A simple specification test for models with many conditional moment inequalities

Author

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  • Marcoux, Mathieu
  • Russell, Thomas M.
  • Wan, Yuanyuan
Abstract
This paper proposes a simple specification test for partially identified models with a large or possibly uncountably infinite number of conditional moment (in)equalities. The approach is valid under weak assumptions, allowing for both weak identification and non-differentiable moment conditions. Computational simplifications are obtained by reusing certain expensive-to-compute components of the test statistic when constructing the critical values. Because of the weak assumptions, the procedure faces a new set of interesting theoretical issues which we show can be addressed by an unconventional sample-splitting procedure that runs multiple tests of the same null hypothesis. The resulting specification test controls size uniformly over a large class of data generating processes, has power tending to 1 for fixed alternatives, and has power against certain local alternatives which we characterize. Finally, the testing procedure is demonstrated in three simulation exercises.

Suggested Citation

  • Marcoux, Mathieu & Russell, Thomas M. & Wan, Yuanyuan, 2024. "A simple specification test for models with many conditional moment inequalities," Journal of Econometrics, Elsevier, vol. 242(1).
    • Handle: RePEc:eee:econom:v:242:y:2024:i:1:s0304407624001349
    DOI: 10.1016/j.jeconom.2024.105788
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    Cited by:

    1. Irene Botosaru & Isaac Loh & Chris Muris, 2024. "An Adversarial Approach to Identification and Inference," Papers 2411.04239, arXiv.org.

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    More about this item

    Keywords

    Misspecification; Moment inequality; Partial identification; Specification testing;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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