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An extension of Kelejian's J-test for non-nested spatial models

Listed author(s):
  • Kelejian, Harry H.
  • Piras, Gianfranco

In 2008 Kelejian extended the J-test procedure to a spatial framework. In that paper he considered a null model which could, but need not, contain spatial lags in both the dependent variable and disturbance term. Under the alternative, he considered one or more non-nested spatial models which could, but need not, also contain spatial lags. Although his suggested test was computationally simple and intuitive, it did not use the available information in an efficient manner. In this paper we suggest a modification of Kelejian's J-test which uses the available information in a more efficient way. We give large sample, as well as small sample Monte Carlo results. Perhaps counter to intuition, we also demonstrate that the "J-test procedure" cannot be used to establish a test for the structure of the error term.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 41 (2011)
Issue (Month): 3 (May)
Pages: 281-292

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Handle: RePEc:eee:regeco:v:41:y:2011:i:3:p:281-292
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  1. 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 509-533, May.
  2. Pesaran, M H & Deaton, Angus S, 1978. "Testing Non-Nested Nonlinear Regression Models," Econometrica, Econometric Society, vol. 46(3), pages 677-694, May.
  3. Kelejian, Harry H. & Prucha, Ingmar R., 2007. "The relative efficiencies of various predictors in spatial econometric models containing spatial lags," Regional Science and Urban Economics, Elsevier, vol. 37(3), pages 363-374, May.
  4. MacKinnon, James G. & White, Halbert & Davidson, Russell, 1983. "Tests for model specification in the presence of alternative hypotheses : Some further results," Journal of Econometrics, Elsevier, vol. 21(1), pages 53-70, January.
  5. M. H. Pesaran, 1974. "On the General Problem of Model Selection," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 153-171.
  6. Geoffrey H. Donovan & Patricia A. Champ & David T. Butry, 2007. "Wildfire Risk and Housing Prices: A Case Study from Colorado Springs," Land Economics, University of Wisconsin Press, vol. 83(2), pages 217-233.
  7. Florax, Raymond J. G. M. & Folmer, Hendrik & Rey, Sergio J., 2003. "Specification searches in spatial econometrics: the relevance of Hendry's methodology," Regional Science and Urban Economics, Elsevier, vol. 33(5), pages 557-579, September.
  8. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-793, May.
  9. Irani Arraiz & David M. Drukker & Harry H. Kelejian & Ingmar R. Prucha, 2010. "A Spatial Cliff-Ord-Type Model With Heteroskedastic Innovations: Small And Large Sample Results," Journal of Regional Science, Wiley Blackwell, vol. 50(2), pages 592-614.
  10. Dastoor, Naorayex K., 1983. "Some aspects of testing non-nested hypotheses," Journal of Econometrics, Elsevier, vol. 21(2), pages 213-228, February.
  11. Baltagi, Badi H. & Song, Seuck Heun & Koh, Won, 2003. "Testing panel data regression models with spatial error correlation," Journal of Econometrics, Elsevier, vol. 117(1), pages 123-150, November.
  12. Godfrey, Leslie G, 1983. "Testing Non-Nested Models after Estimation by Instrumental Variables or Least Squares," Econometrica, Econometric Society, vol. 51(2), pages 355-365, March.
  13. Baltagi, Badi H. & Heun Song, Seuck & Cheol Jung, Byoung & Koh, Won, 2007. "Testing for serial correlation, spatial autocorrelation and random effects using panel data," Journal of Econometrics, Elsevier, vol. 140(1), pages 5-51, September.
  14. Miguel A. Delgado & Thanasis Stengos, 1994. "Semiparametric Specification Testing of Non-nested Econometric Models," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 291-303.
  15. Pesaran, M H, 1982. "Comparison of Local Power of Alternative Tests of Non-Nested Regression Models," Econometrica, Econometric Society, vol. 50(5), pages 1287-1305, September.
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