Optimal Transportation and the Falsifiability of Incompletely Specified Economic Models. Part I : Parametric Restrictions on Latent Variables

A general framework is given to analyze the falsifiability of economic models based on a sample of their observable components. It is shown that, when the restrictions implied by the economic model are insufficient to identify the unknown quantities of the model, the duality of optimal transportation with zero-one cost function delivers interpretable and operational formulations of the hypothesis of model correctness from which tests can be constructed to falsify the model