Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: Jan, 2024, Volume 15, Issue 1

A Robust Permutation Test for Subvector Inference in Linear Regressions

https://doi.org/10.3982/QE2269
p. 27-87

Xavier D'Haultfœuille, Purevdorj Tuvaandorj

We develop a new permutation test for inference on a subvector of coefficients in linear models. The test is exact when the regressors and the error terms are independent. Then we show that the test is asymptotically of correct level, consistent, and has power against local alternatives when the independence condition is relaxed, under two main conditions. The first is a slight reinforcement of the usual absence of correlation between the regressors and the error term. The second is that the number of strata, defined by values of the regressors not involved in the subvector test, is small compared to the sample size. The latter implies that the vector of nuisance regressors is discrete. Simulations and empirical illustrations suggest that the test has good power in practice if, indeed, the number of strata is small compared to the sample size.


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Supplemental Material

Supplement to "A Robust Permutation Test for Subvector Inference in Linear Regressions"

Xavier D’Haultfœuille and Purevdorj Tuvaandorj

The replication package for this paper is available at https://doi.org/10.5281/zenodo.8422960. The Journal checked the data and codes included in the package for their ability to reproduce the results in the paper and approved online appendices.

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