Testing for Monotonicity under Endogeneity: An Application to the Reservation Wage Function

Date: 31 August 2014

This paper develops a test for monotonicity of nonparametric regression models under endogeneity, which in its generality is novel in the literature. The test statistic, which is built upon a second order U-process, introduces `correction terms' based on control functions that purge the endogeneity. The test has a non-standard asymptotic distribution from which asymptotic critical values can directly be derived. Furthermore, the test statistic is extended to accomodate multivariate (exogenous) regressors. Consistency against general alternatives is proved and the finite sample properties of the test are examined in a Monte Carlo experiment.

Daniel Gutknecht

Ethics and Economics

Ethics and Economics

Testing for Monotonicity under Endogeneity: An Application to the Reservation Wage Function


Type: working-paper

Gutknecht, D. (2014) `Testing for Monotonicity under Endogeneity: An Application to the Reservation Wage Function’, University of Oxford Working Paper, 31st August 2014


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