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Testing additive versus interactive effects in fixed-T panels

Joakim Westerlund

Economics Letters, 2019, vol. 174, issue C, 5-8

Abstract: This paper proposes a new test of the null hypothesis of additive fixed effects versus the alternative of general interactive effects. This is not the only test of its kind in the literature; however, it is the only test that is valid in panels where T is fixed. The asymptotic distribution of the new test statistic is derived and simulation results are provided to suggest that it performs well in small samples.

Keywords: Panel data regression; Additive fixed effects; Interactive effects; Hausman test (search for similar items in EconPapers)
JEL-codes: C12 C33 (search for similar items in EconPapers)
Date: 2019
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