Testing for Persistence in the Error Component Model:A One-Sided Approach

Walter Sosa Escudero ()

No 94, Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: This paper proposes new simple testing procedures for the joint null hypothesis of absence of persistent e®ects in the form of random e®ects and ¯rst order serial correlation in the error component model. The fact that the presence of random effects is clearly of a one-sided nature, together with the fact that in many empirical applications researchers worry about positive serial correlation leaves room for a power gain that arises from restricting the parameter space under the alternative hypothesis, compared to existing procedures that allow for two-sided alternatives. A Monte Carlo experiment shows that the proposed statistics have good size and power performance in very small samples like those typically used in applied work in panel data. An empirical example illustrates the usefulness of the proposed statistics.

Keywords: error component model; testing; random effects; serial correlation; one-sided alternatives (search for similar items in EconPapers)
JEL-codes: C12 C23 C52 (search for similar items in EconPapers)
Date: 2007-02, Revised 2007-02
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
ftp://webacademicos.udesa.edu.ar/pub/econ/doc94.pdf First version, 2007 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:sad:wpaper:94

Access Statistics for this paper

More papers in Working Papers from Universidad de San Andres, Departamento de Economia
Contact information at EDIRC.
Series data maintained by Tamara Sulaque ().