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

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  • Harry H. Kelejian

    ()
    (Department of Economics, University of Maryland)

  • Gianfranco Piras

    ()
    (Regional Research Institute, West Virginia University)

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    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.

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    File URL: http://rri.wvu.edu/wp-content/uploads/2012/11/PirasKelejianJ_TestWP2013.pdf
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    Bibliographic Info

    Paper provided by Regional Research Institute, West Virginia University in its series Working Papers with number 201303.

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    Length: 42 pages
    Date of creation: Mar 2013
    Date of revision:
    Handle: RePEc:rri:wpaper:201303

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    Keywords: spatial panel models; fixed effects; time and spatial lags; non-nested j-test;

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    21. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
    22. Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
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