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Testing for Endogeneity: A Moment-Based Bayesian Approach

Siddhartha Chib, Minchul Shin, Anna Simoni

arXiv 8 Mar 2026 · Econometrics · 1 citations (OpenAlex)

arXiv:2603.07780 · PDF · DOI · OpenAlex · Extracted main text

Abstract

A standard assumption in the Bayesian estimation of linear regression models is that the regressors are exogenous in the sense that they are uncorrelated with the model error term. In practice, however, this assumption can be invalid. In this paper, using the exponentially tilted empirical likelihood framework, we develop a Bayes factor test for endogeneity that compares a base model that is correctly specified under exogeneity but misspecified under endogeneity against an extended model that is correctly specified in either case. We provide a comprehensive study of the log-marginal exponentially tilted empirical likelihood. We demonstrate that our testing procedure is consistent from a frequentist point of view: as the sample grows, it almost surely selects the base model if and only if the regressors are exogenous, and the extended model if and only if the regressors are endogenous. The methods are illustrated with simulated data, and problems concerning the causal effect of automobile prices on automobile demand and the causal effect of potentially endogenous airplane ticket prices on passenger volume.

Citation extraction

36
references
104
in-text mentions
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distinct cited
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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
1Siddhartha Chib and Minchul Shin and Anna Simoni Bayesian estimation and comparison of moment condition models self0.94118483%
2Siddhartha Chib Marginal likelihood from the Gibbs output self0.92843100%
3Siddhartha Chib and Ivan Jeliazkov Marginal likelihood from the Metropolis-Hastings output self0.7373367%
4Schennach, Susanne M Bayesian exponentially tilted empirical likelihood0.73732100%
5Siddhartha Chib and Edward Greenberg Understanding the Metropolis-Hastings algorithm self0.64422100%
6Andrews, Donald W. K Consistent Moment Selection Procedures for Generalized Method of Moments Estimation0.5112250%
7Hong,Han and Preston,Bruce and Shum,Matthew Generalized Empirical Likelihood-Based Model Selection Criteria for Moment Condition Models0.5112250%
8Sin, C.Y. and White, H Information Criteria for Selecting Possibly Misspecified Parametric Models0.51121100%
9Donald W. K. Andrews and Biao Lu Consistent Model and Moment Selection Procedures for GMM Estimation with Application to Dynamic Panel Data Models0.40511100%
10J.C. Chao and P.C.B. Phillips Posterior distributions in limited information analysis of the simultaneous equations model using the Jeffreys prior0.40511100%

Showing the top 10 of 36 scored citations.