Specification and testing of models estimated by quadrature

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SUMMARY

This paper proposes a test to check the specification of models with unobserved individual effects integrated out by quadrature and also a simple way of increasing the flexibility of this type of model. The results of a Monte Carlo study and an application using a well-known dataset illustrate the finite sample properties of the proposed methods and their implementation in practice. Copyright © 2010 John Wiley & Sons, Ltd.

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