On the Use of Enumeration for Investigating the Performance of HypothesisTests for Economic Models with a Discrete Response Variable

  • Authors:

  • Simon Peters;Andrew Chesher

  • Affiliations:

  • School of Economic Studies, Dover St., Manchester University, Manchester, U.K.;Department of Economics, University College London, London, U.K.

  • Venue:
  • Computational Economics
  • Year:
  • 2000

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Abstract

This article notes that it is now practical to use the method of enumerationto analyse the performance of estimators and hypothesis tests of fullyparametric binary data models. The general method is presented and thenemployed to investigate the power performance of a common misspecificationtest for the Probit model. The advantages, disadvantages and limitations ofenumeration compared with standard Monte Carlo simulation are thendiscussed. Finally, an example from experimental economics is used todemonstrate that the methodology can also be used in small empirical studies.