Diagnostic Tests of Cross Section Independence for Nonlinear Panel Data Models
AbstractIn this paper we discuss tests for residual cross section dependence in nonlinear panel data models. The tests are based on average pair-wise residual correlation coefficients. In nonlinear models, the definition of the residual is ambiguous and we consider two approaches: deviations of the observed dependent variable from its expected value and generalized residuals. We show the asymptotic consistency of the cross section dependence (CD) test of Pesaran (2004). In Monte Carlo experiments it emerges that the CD test has the correct size for any combination of N and T whereas the LM test relies on T large relative to N. We then analyze the roll-call votes of the 104th U.S. Congress and find considerable dependence between the votes of the members of Congress.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0716.
Date of creation: Apr 2007
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Web page: http://www.econ.cam.ac.uk/index.htm
Cross-section dependence; nonlinear panel data model.;
Other versions of this item:
- Hsiao, Cheng & Pesaran, M. Hashem & Pick, Andreas, 2007. "Diagnostic Tests of Cross Section Independence for Nonlinear Panel Data Models," IZA Discussion Papers 2756, Institute for the Study of Labor (IZA).
- Cheng Hsiao & M. Hashem Pesaran & Andreas Pick, 2007. "Diagnostic Tests of Cross Section Independence for Nonlinear Panel Data Model," DNB Working Papers 140, Netherlands Central Bank, Research Department.
- Cheng Hsiao & M. Hashem Pesaran & Andreas Pick, 2007. "Diagnostic Tests of Cross Section Independence for Nonlinear Panel Data Models," CESifo Working Paper Series 1984, CESifo Group Munich.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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