SOME SPECIFICATION TESTS FOR PROBIT MODELS ESTIMATED ON PANEL-DATA

Generalized score and Wald tests are proposed to examine certain aspec ts of the specification of panel probit models. The procedures used to detect misspecifications, such as omitted and superfluous variables, heteroscedasticity, nonnormality, and random-coefficient variations, a re designed specifically for the case in which the model is estimated by sequential methods. The finite-sample distributions of the test sta tistics in correctly and incorrectly specified models are investigated by a Monte Carlo study. Applying the proposed procedures to the analy sis of the determinants of self-employment in Germany shows that the s uggested specification checks are useful instruments in applied work.