We provide a ﬁnite sample inference method for the structural parameters of a semiparametric binary response model under a conditional median restriction originally studied by Manski (1975, 1985). Our inference method is valid for any sample size and irrespective of whether the structural parameters are point identiﬁed or partially identiﬁed, for example due to the lack of a continuously distributed covariate with large support. Our inference approach exploits distributional properties of observable outcomes conditional on the observed sequence of exogenous variables. Moment inequalities conditional on this size n sequence of exogenous covariates are constructed, and the test statistic is a monotone function of violations of sample moment inequalities. The critical value used for inference is provided by the appropriate quantile of a known function of n independent Rademacher random variables. Simulation studies compare the performance of the test to two alternative tests using an infeasible likelihood ratio statistic and Horowitz’s (1992) smoothed maximum score estimator.
11 May 2020
Working Paper (CWP22/20)