Tests of Hypotheses Arising In the Correlated Random Coefficient Model

This paper examines the correlated random coecient model. It extends the analysis of Swamy (1971, 1974), who pioneered the uncorrelated random coecient model in economics. We develop the properties of the correlated random coecient model and derive a new representation of the variance of the instrumental variable estimator for that model. We develop tests of the validity of the correlated random coecient model against the null hypothesis of the uncorrelated random coecient model.