TESTING FOR MISSPECIFICATION IN THE REFERENDUM CONTINGENT VALUATION APPROACH

Binary choice models are frequently used in the analysis of referendum contingent valuation data. Because omitted regressors, heteroskedasti city, and distribution asymmetry in these models result in inconsisten t parameter estimates, it is important that misspecification tests be undertaken. In this article, conditional moment tests for these proble ms are presented and applied to data from two referendum contingent va luation studies. Results show that some models have misspecification p roblems and that these problems affect the estimation of welfare measu res.