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Relaxing the assumptions of specific functional forms in studying socio-economic relationships is important to minimise specification errors and to allow the data to offer the best insights into the relationship investigated.
The evidence does not strongly support an effect of prices on binge drinking, but this reflects measurement and specification errors.
However, because IRFs are calculated recursively in this approach, they have been criticized for being sensitive to small specification errors that always exist in practice (Teulings and Zubanov2010).
Conventional standard errors ignore the group structure induced by specification errors and tend to overstate the precision of the estimated program impacts.
On the other hand, methods making use of exclusion restrictions (instrumental variables, control functions, 'fuzzy' regression discontinuity designs) can explicitly address selection on unobservables, arising from specification errors, endogeneity and unobserved heterogeneity [6].
Most of the previous literature looking at VR has examined programs with different rehabilitation strategies as well as different client bases and many of these studies may also be sensitive to specification errors or contaminated by other problems, as they sometimes do not use very transparent identification strategies.
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All essential attributes should appear in the choice scenarios to avoid specification error in estimating the utility function [5, 26].
All essential attributes should appear in the choice scenarios to avoid specification error in estimating the utility function.
The proposed inference procedure that allows for specification error also has a natural interpretation within a Bayesian framework.
Heckman [14] introduced self-selection bias and treated the unobserved selection factors as a problem of specification error or a problem of omitted variables.
Further, the Ramsey Regression Equation Specification Error Test [23] was carried out to test whether non-linear combinations of the fitted values help explain the response variable.
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