Journal
JOURNAL OF ECONOMETRICS
Volume 167, Issue 1, Pages 133-139Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jeconom.2011.10.005
Keywords
Hahn-Hausman test; Sargan test; Many instruments; Overidentifying restrictions test; Specification test
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Funding
- Japan Society of the Promotion of Science [KAKENHI22730176, KAKENHI22330067]
- Grants-in-Aid for Scientific Research [22330067] Funding Source: KAKEN
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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. (C) 2011 Elsevier B.V. All rights reserved.
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