Specification tests for spatial panel data models
Anil K. Bera (),
Osman Doğan (),
Süleyman Taşpınar () and
Monalisa Sen ()
Additional contact information
Anil K. Bera: University of Illinois at Urbana-Champaign
Osman Doğan: University of Illinois at Urbana-Champaign
Süleyman Taşpınar: The City University of New York
Monalisa Sen: University of Illinois at Urbana-Champaign
Journal in Spatial Econometrics, 2020, vol. 1, issue 1, 1-39
Abstract Specification of a model is one of the most fundamental problems in econometrics. In practice, specification tests are generally carried out in a piecemeal fashion, for example, testing the presence of one-effect at a time ignoring the potential presence of other forms of misspecification. Many of the suggested tests in the literature require estimation of complex models and even then those tests cannot account for multiple forms of departures from the model under the null hypothesis. Using Bera and Yoon (Econom Theory 9(04):649–658, 1993) general test principle and a spatial panel model framework, we first propose an overall test for “all” possible misspecification. Then, we derive adjusted Rao’s score tests for random effect, serial correlation, spatial lag and spatial error, which can identify the definite cause(s) of rejection of the basic model and thus aiding in the steps for model revision. For empirical researchers, our suggested procedures provide simple strategies for model specification search employing only the ordinary least squares residuals from a standard linear panel regression. Through an extensive simulation study, we evaluate the finite sample performance of our suggested tests and some of the existing procedures. We find that our proposed tests have good finite sample properties both in terms of size and power. Finally, to illustrate the usefulness of our procedures, we provide an empirical application of our test strategy in the context of the convergence theory of incomes of different economies, which is a widely studied empirical problem in macro-economic growth theory. Our empirical illustration reveals the problems in using and interpreting unadjusted tests, and demonstrates how these problems are rectified in using our proposed adjusted tests.
Keywords: Rao’s score (RS) test; Robust RS test; Specification test; Spatial models; Spatial panel data models (search for similar items in EconPapers)
JEL-codes: C13 C21 C31 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s43071-020-00003-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:jospat:v:1:y:2020:i:1:d:10.1007_s43071-020-00003-y
Ordering information: This journal article can be ordered from
Access Statistics for this article
Journal in Spatial Econometrics is currently edited by Giuseppe Arbia, Lung Fei Lee and James LeSage
More articles in Journal in Spatial Econometrics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().