Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2004:1: Toward a Unified Approach to Testing for Weak Separability

Barry Jones (), Thomas Elger , David Edgerton () and Donald Dutkowsky
Additional contact information
Barry Jones: Department of Economics, State University of New York at Binghamton, Postal: Department of Economics, Binghamton University, State University of New York, PO Box 6000, Binghamton, NY 13902-6000, USA
Thomas Elger: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
David Edgerton: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Donald Dutkowsky: Department of Economics, Syracuse University, Postal: Department of Economics, 110 F Eggers Hall, Syracuse University, Syracuse, NY 13244-1020, USA

Abstract: In this paper we propose a unified framework for testing weak separability. We present a new three-step procedure, which is a joint test of necessary and sufficient conditions that takes account of the possibilities of both measurement error and incomplete adjustment. We illustrate the operational capability of the procedure with an empirical example. At the present time our procedure works well in medium sized samples, but may not be practical for datasets with extremely large sample sizes. As computing technology continues to advance, however, high-powered methods like the one we propose should supplant testing approaches that were originally designed to circumvent computational limitations

Keywords: Weak separability; measurement error; incomplete adjustment

JEL-codes: C14; D11

13 pages, January 21, 2004

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