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Testing for exogeneity in limited dependent variable models using a simplified likelihood ratio statistic
Author(s) -
Smith Richard J.
Publication year - 1987
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.3950020307
Subject(s) - endogeneity , statistic , likelihood ratio test , statistics , econometrics , mathematics , variable (mathematics) , test statistic , maximum likelihood , simultaneous equations model , instrumental variable , statistical hypothesis testing , mathematical analysis
A simple likelihood‐ratio statistic for the weak exogeneity of the continuously observed endogenous variables is presented for the limited information simultaneous equations models in which a single endogenous variable is censored. The statistic is a likelihood ratio test statistic for the exclusion of the reduced form residuals of the continuously observed endogenous variables and is asymptotically locally most powerful. The procedure is illustrated by an application to a model of female labour supply.