Testing for Random Effects and Spatial Lag Dependence in Panel Data Models

Badi Baltagi and Long Liu

No 102, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: This paper derives a joint Lagrande Multiplier (LM) test which simultaneously tests for the absence of spatial lag dependence and random individual effects in a panel data regression model. It turns out that this LM statistic is the sum of two standard LM statistics. The first one tests for the absence of spatial lag dependence ignoring the random individual effects, and the second one tests for the absence of random individual effects ignoring the spatial lag dependence. This paper also derives two conditional LM tests. The first one tests for the absence of random individual effects without ignoring the possible presence of spatial lag dependence. The second one tests for the absence of spatial lag dependence without ignoring the possible presence of random individual effects.

Keywords: Panel data; spatial lag dependence; Lagrange Multiplier tests; random effects (search for similar items in EconPapers)
JEL-codes: C12 C23 (search for similar items in EconPapers)
Pages: 117 pages
Date: 2008-03
New Economics Papers: this item is included in nep-ecm and nep-geo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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https://surface.syr.edu/cpr/64/ (application/pdf)

Related works:
Journal Article: Testing for random effects and spatial lag dependence in panel data models (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:102

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