Identification <sup>1</sup>

Qin Duo

in The Formation of Econometrics

Published in print July 1997 | ISBN: 9780198292876
Published online November 2003 | e-ISBN: 9780191596803 | DOI:
 Identification  1

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Narrates the process of how identification was formalized in econometrics. The issue of identification stemmed from the quest to know the attainability of economically meaningful relationships from statistical analysis of economic data in early estimation attempts. It arose out of the ‘correspondence’ problems ‘between economic activity, the data that activity generates, the theoretical economic model and the estimated relationship’ (Morgan, 1990). When identification theory was eventually formalized, its purpose became focused on the conditions under which a certain set of values of structural parameters could be uniquely determined from the data among all the permissible sets embodied in a mathematically complete theoretical model, usually composed of a simultaneous‐equations system. These conditions are most commonly known as the order and rank conditions in the context of linear, simultaneous‐equations models in present‐day econometrics textbooks. The emergence of identification theory played a key role in the formal establishment of the structural approach of orthodox econometrics through its links to model testing and model specification. Traces the formalization of identification theory around two interwoven themes: how the identification problem was perceived and described in connection with the other issues in econometric modelling; and how the problem was formalized and tackled with mathematical and statistical means. The first section outlines the early appearance of the identification problem and some ad hoc solutions for particular cases and model forms before the mid‐1930s; the second centres upon the initial systematic work on the issue around 1940; the third is devoted to the contribution of the Cowles group; and the completion of the theoretical framework and its overlaps with other modelling issues form the subject of the last section.

Keywords: econometric modelling; econometric models; econometric theory; econometrics; formalization; history; identification theory; order and rank conditions

Chapter.  9444 words. 

Subjects: History of Economic Thought

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