Robust random effects tests for two-way error component models with panel data

Jianhong Wu

Economic Modelling, 2016, vol. 59, issue C, 1-8

Abstract: In this paper, two test statistics are constructed respectively for individual and time effects in linear panel data models by comparing estimators of the variance of the idiosyncratic error at different robust levels. The resultant tests are one-sided, and asymptotically normally distributed under the null hypothesis. Power study shows that the tests can detect local alternatives that differ from the null hypothesis at the parametric rate. Due to the first difference and orthogonal transformations used in the construction of variance estimators of the idiosyncratic error, the two proposed tests are robust to the presence of one effect and the possible correlation between the covariates and the error components when the other one is tested. Monte Carlo simulations are carried out to provide evidence on the finite sample properties of the tests.

Keywords: Hypothesis test; Individual effect; Panel data model; Time effect (search for similar items in EconPapers)
JEL-codes: C1 C12 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999316301730
Full text for ScienceDirect subscribers only

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: https://EconPapers.repec.org/RePEc:eee:ecmode:v:59:y:2016:i:c:p:1-8

DOI: 10.1016/j.econmod.2016.06.010

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().