A Bootstrap Specification Test for Semiparametric Models With Generated Regressors

This article provides a specification test for semiparametric models with nonparametrically generated regressors. Such regressors are not observed by the researcher but are nonparametrically identified and estimable. Applications of the test include models with endogenous regressors identified by control functions, semiparametric sample selection models, or binary games with incomplete information. The statistic is built from the residuals of the semiparametric model. A novel wild bootstrap procedure is shown to provide valid critical values. We consider nonparametric estimators with an automatic bias correction that makes the test implementable without undersmoothing. In simulations, the test exhibits good small sample performance, and an application to women’s labor force participation decisions shows its implementation in a real data context.