A J-Test for Panel Models with Fixed Effects, Spatial and Time

Harry Kelejian () and Gianfranco Piras
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Harry Kelejian: Department of Economics, University of Maryland

Working Papers from Regional Research Institute, West Virginia University

Abstract: In this paper we suggest a J-test in a spatial panel framework of a null model against one or more alternatives. The null model we consider has fixed effects, along with spatial and time dependence. The alternatives can have either fixed or random effects. We implement our procedure to test the specifications of a demand for cigarette model. We find that the most appropriate specification is one that contains the average price of cigarettes in neighboring states, as well as the spatial lag of the dependent variable. Along with formal large sample results, we also give small sample Monte Carlo results. Our large samples results are based on the assumption N ? 8 and T is fixed. Our Monte Carlo results suggest that our proposed J-test has good power, and proper size even for small to moderately sized samples.

Keywords: spatial panel models; fixed effects; time and spatial lags; non-nested j-test (search for similar items in EconPapers)
JEL-codes: C01 C12 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2013-03
New Economics Papers: this item is included in nep-ecm and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:rri:wpaper:2013wp03

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