Econometrica: Sep 1989, Volume 57, Issue 5

Power in Econometric Applications

https://doi.org/0012-9682(198909)57:5<1059:PIEA>2.0.CO;2-W
p. 1059-1090

Donald W. K. Andrews

This paper is concerned with the use of power properties of tests in econometric applications. Inverse power functions are defined. These functions are designed to yield summary measures of power that facilitate the interpretation of test results in practice. Simple approximations are introduced for the inverse power functions of Wald, likelihood ratio, Lagrange multiplier, and Hausman tests. These approximations readily convey the general qualitative features of the power of a test. Examples are provided to illustrate their usefulness in interpreting test results.

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