Overidentification Tests with Grouped Data

Caroline Hoxby, M. Daniele Paserman

NBER Technical Working Paper No. 223
Issued in February 1998

This paper examines the validity of overidentification tests and exogeneity tests in the presence of grouped data. We find that even a small intra-group correlation, when instruments do not vary within groups, may generate a substantial bias in the standard overidentification tests described in textbooks.

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