Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent Variables
We propose a random effects panel data model with both spatially correlated error components and spatially lagged dependent variables. We focus on diagnostic testing procedures and derive Lagrange multiplier (LM) test statistics for a variety of hypotheses within this model. We first construct the j...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2015-11-01
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| Series: | Econometrics |
| Subjects: | |
| Online Access: | http://www.mdpi.com/2225-1146/3/4/761 |
| _version_ | 1798038977551269888 |
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| author | Ming He Kuan-Pin Lin |
| author_facet | Ming He Kuan-Pin Lin |
| author_sort | Ming He |
| collection | DOAJ |
| description | We propose a random effects panel data model with both spatially correlated error components and spatially lagged dependent variables. We focus on diagnostic testing procedures and derive Lagrange multiplier (LM) test statistics for a variety of hypotheses within this model. We first construct the joint LM test for both the individual random effects and the two spatial effects (spatial error correlation and spatial lag dependence). We then provide LM tests for the individual random effects and for the two spatial effects separately. In addition, in order to guard against local model misspecification, we derive locally adjusted (robust) LM tests based on the Bera and Yoon principle (Bera and Yoon, 1993). We conduct a small Monte Carlo simulation to show the good finite sample performances of these LM test statistics and revisit the cigarette demand example in Baltagi and Levin (1992) to illustrate our testing procedures. |
| first_indexed | 2024-04-11T21:47:35Z |
| format | Article |
| id | doaj.art-3290a45ad2a14897901610927777d582 |
| institution | Directory Open Access Journal |
| issn | 2225-1146 |
| language | English |
| last_indexed | 2024-04-11T21:47:35Z |
| publishDate | 2015-11-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Econometrics |
| spelling | doaj.art-3290a45ad2a14897901610927777d5822022-12-22T04:01:23ZengMDPI AGEconometrics2225-11462015-11-013476179610.3390/econometrics3040761econometrics3040761Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent VariablesMing He0Kuan-Pin Lin1Department of Economics, University of Washington, Seattle, WA 98195, USADepartment of Economics, Portland State University, Portland, OR 97201, USAWe propose a random effects panel data model with both spatially correlated error components and spatially lagged dependent variables. We focus on diagnostic testing procedures and derive Lagrange multiplier (LM) test statistics for a variety of hypotheses within this model. We first construct the joint LM test for both the individual random effects and the two spatial effects (spatial error correlation and spatial lag dependence). We then provide LM tests for the individual random effects and for the two spatial effects separately. In addition, in order to guard against local model misspecification, we derive locally adjusted (robust) LM tests based on the Bera and Yoon principle (Bera and Yoon, 1993). We conduct a small Monte Carlo simulation to show the good finite sample performances of these LM test statistics and revisit the cigarette demand example in Baltagi and Levin (1992) to illustrate our testing procedures.http://www.mdpi.com/2225-1146/3/4/761individual random effectsspatial error correlationspatial lag dependencelagrange multiplier (LM) test(robust) LM test |
| spellingShingle | Ming He Kuan-Pin Lin Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent Variables Econometrics individual random effects spatial error correlation spatial lag dependence lagrange multiplier (LM) test (robust) LM test |
| title | Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent Variables |
| title_full | Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent Variables |
| title_fullStr | Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent Variables |
| title_full_unstemmed | Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent Variables |
| title_short | Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent Variables |
| title_sort | testing in a random effects panel data model with spatially correlated error components and spatially lagged dependent variables |
| topic | individual random effects spatial error correlation spatial lag dependence lagrange multiplier (LM) test (robust) LM test |
| url | http://www.mdpi.com/2225-1146/3/4/761 |
| work_keys_str_mv | AT minghe testinginarandomeffectspaneldatamodelwithspatiallycorrelatederrorcomponentsandspatiallylaggeddependentvariables AT kuanpinlin testinginarandomeffectspaneldatamodelwithspatiallycorrelatederrorcomponentsandspatiallylaggeddependentvariables |