In the linear instrumental variables model, we characterize fixed alternatives against which the test of overidentifying restrictions (OR) is inconsistent. When there is the notion of a “true parameter”, we relate this inconsistency result to the literature on optimality properties of...

A simple example is provided that shows that one test can strictly dominate another test in both local power and its robustness to asymptotic size distortion under local model misspecification, with both tests having asymptotic size equal to nominal size under correct model specification....

We provide a specification test for moment inequalities based on a dual characterization of the moment inequalities. For linear moment inequalities, the test is the asymptotic version of the multi-dimensional linear one-sided tests. For nonlinear moment inequalities, the implementation of the...