“Tests for classification as endogenous or predetermined of arbitrary subsets of
regressors are formulated as significance tests in auxiliary IV regressions and their
relationships with various more classic test procedures are examined. Simulation
experiments are designed by solving the data generating process parameters from
salient econometric features, namely: degree of simultaneity and multicollinearity
of regressors, and individual and joint strength of external instrumental variables.
Thus, for various test implementations, a wide class of relevant cases is scanned
for flaws in performance regarding type I and II errors. Substantial size distortions
occur, but these can be cured remarkably well through bootstrapping, except when
instruments are weak. The power of the subset tests is such that they establish
an essential addition to the well-known classic full-set DWH tests in a data based
classification of individual explanatory variables.