A goal of economic research is to determine the causal relationship among economic variables. This paper introduces the Hausman speci cation test of endogeneity, for testing the independence between the stochastic regressor and the disturbances. We describe alternative approaches to estimating simultaneous-equation systems and we present an empirical example of economic growth and health that n...

Despite the advantages of structural labor supply methods, many recent papers cite the arguments of MaCurdy et al. as a reason for avoiding structural methods, and instead use simple estimation methods such as differences in differences. This paper examines the role of economic assumptions in structural labor supply methods and how some of the assumptions may be relaxed. We first show the sourc...

What is the weak instruments (WI) problem and what causes it? Universal agreement does not exist on these questions. We define weak instruments by two features: (1) 2SLS is badly biased toward the OLS estimate and alternative “unbiased” estimators such as LIML may not solve the problem and (2) the standard (first order) asymptotic distribution does not give an accurate framework for inference. ...

An important concern in an observational study is whether or not there is unmeasured confounding, that is, unmeasured ways in which the treatment and control groups differ before treatment, which affect the outcome. We develop a test of whether there is unmeasured confounding when an instrumental variable (IV) is available. An IV is a variable that is independent of the unmeasured confounding a...

This paper describes the package maxLik for the statistical environment R. The package is essentially a unified wrapper interface to various optimization routines, offering easy access to likelihood-specific features like standard errors or information matrix equality (BHHH method). More advanced features of the optimization algorithms, such as forcing the value of a particular parameter to be ...

We propose an alternative Hausman test for normality in the Tobit model. Unlike the previous tests by Ruud (1984) or Newey (1987), our test compares the Tobit estimator to an estimator which is consistent both under the null hypothesis and under the alternative hypothesis. To do so, it utilizes a purely nonparametric estimator for the Tobit model proposed by Newey (1999b) and Jeong (2004). We p...