Specification tests for partially identified models defined by moment inequalities

This paper studies the problem of specification testing in partially identified models defined by a finite number of moment equalities and inequalities (i.e., (in)equalities). Under the null hypothesis, there is at least one parameter value that simultaneously satisfies all of the moment (in)equalities whereas under the alternative hypothesis there is no such parameter value. While this problem has not been directly addressed in the literature (except in particular cases), several papers have suggested implementing this inferential problem by checking whether confidence intervals for the parameters of interest are empty or not.

We propose two hypothesis tests that use the infimum of the sample criterion function over the parameter space as the test statistic together with two different critical values. We obtain two main results. First, we show that the two tests we propose are asymptotically size correct in a uniform sense. Second we show our tests are more powerful than the test that checks whether the confidence set for the parameters of interest is empty or not.