Diagnostic tests for models based on individual data: A survey
Version of Record online: 8 AUG 2006
Copyright © 1989 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Supplement: Special Issue on Topics in Applied Econometrics
Volume 4, Issue Supplement S1, pages S29–S59, December 1989
How to Cite
Pagan, A. and Vella, F. (1989), Diagnostic tests for models based on individual data: A survey. J. Appl. Econ., 4: S29–S59. doi: 10.1002/jae.3950040504
- Issue online: 8 AUG 2006
- Version of Record online: 8 AUG 2006
- Manuscript Revised: SEP 1988
- Manuscript Received: JUN 1988
- NSF. Grant Number: SES-8719520
This paper surveys the growing literature on diagnostic testing of models based on unit record data. We argue that while many of these tests are produced in a Lagrange multiplier framework they are often more readily derived, and more easily applied, if approached from the conditional moment testing view of Newey (1985) and Tauchen (1985). In addition we propose some new tests based on comparisons of parametric estimators with nonparametric estimators which are consistent under certain forms of misspecification. To illustrate the utility of the tests we employ them in the examination of some existing published studies.