Econometrica Vol. 71 No. 4 2003
A Conditional Likelihood Ratio Test for Structural Models
Abstract
This paper develops a general method for constructing exactly similar tests based on the conditional distribution of nonpivotal statistics in a simultaneous equations model with normal errors and known reduced-form covariance matrix. These tests are shown to be similar under weak-instrument asymptotics when the reduced-form covariance matrix is estimated and the errors are non-normal. The conditional test based on the likelihood ratio statistic is particularly simple and has good power properties. Like the score test, it is optimal under the usual local-to-null asymptotics, but it has better power when identification is weak.
- DOI
- 10.1111/1468-0262.00438
- Volume
- 71
- Issue
- 4
- Pages
- 1027-1048
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref