Testing for spatial lag dependence and homoskedasticity in a random effects panel data model

Badi Baltagi and Long Liu

Economics Letters, 2025, vol. 254, issue C

Abstract: This paper derives a joint Lagrange Multiplier (LM) test for spatial correlation and homoskedasticity for a spatial autoregressive (SAR) panel model with random effects. The heteroskedasticity in the random effects term is an unknown function of known strictly exogenous variables as in Holly and Gardiol (2000). The latter paper deals with a panel random effects model with heteroskedasticity that ignores the spatial correlation. Conditional LM tests for homoskedasticity given spatial lag correlation, as well as zero spatial lag correlation given heteroskedasticity are also derived. Monte Carlo experiments are performed to study the small sample performance of these tests.

Keywords: Panel data; Spatial lag dependence; Lagrange Multiplier tests; Random effects; Heteroskedasticity (search for similar items in EconPapers)
JEL-codes: C12 C21 C23 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176525003064
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:ecolet:v:254:y:2025:i:c:s0165176525003064

DOI: 10.1016/j.econlet.2025.112469

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

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