Heteroskedasticity and non-normality robust LM tests for spatial dependence

Badi Baltagi and Zhenlin Yang

Regional Science and Urban Economics, 2013, vol. 43, issue 5, 725-739

Abstract: The standard LM tests for spatial dependence in linear and panel regressions are derived under the normality and homoskedasticity assumptions of the regression disturbances. Hence, they may not be robust against non-normality or heteroskedasticity of the disturbances. Following Born and Breitung (2011), we introduce general methods to modify the standard LM tests so that they become robust against heteroskedasticity and non-normality. The idea behind the robustification is to decompose the concentrated score function into a sum of uncorrelated terms so that the outer product of gradient (OPG) can be used to estimate its variance. We also provide methods for improving the finite sample performance of the proposed tests. These methods are then applied to several popular spatial models. Monte Carlo results show that they work well in finite sample.

Keywords: Centering; Heteroskedasticity; Non-normality; LM test; Panel model; Spatial dependence (search for similar items in EconPapers)
JEL-codes: C21 C23 C5 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S016604621300046X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Heteroskedasticity and Non-normality Robust LM Tests for Spatial Dependence (2013)
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:regeco:v:43:y:2013:i:5:p:725-739

DOI: 10.1016/j.regsciurbeco.2013.05.001

Access Statistics for this article

Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou

More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().