Testing endogeneity with high dimensional covariates
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Abstract: Modern, high dimensional data has renewed investigation on instrumental variables (IV) analysis, primarily focusing on estimation of effects of endogenous variables and putting little attention towards specification tests. This paper studies in high dimensions the Durbin-Wu-Hausman (DWH) test, a popular specification test for endogeneity in IV regression. We show, surprisingly, that the DWH test maintains its size in high dimensions, but at an expense of power. We propose a new test that remedies this issue and has better power than the DWH test. Simulation studies reveal that our test achieves near-oracle performance to detect endogeneity.
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Cited in
(9)- Endogenous treatment effect estimation using high-dimensional instruments and double selection
- Structural Equation Model Averaging: Methodology and Application
- Endogeneity in high dimensions
- RobustIV
- Nonparametric instrument model averaging
- Hypothesis testing in high-dimensional instrumental variables regression with an application to genomics data
- Dummy endogenous treatment effect estimation using high‐dimensional instrumental variables
- Conditional sparse boosting for high-dimensional instrumental variable estimation
- Regularization methods for high-dimensional sparse control function models
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