Testing the fixed effects restrictions? A Monte Carlo study of Chamberlain's Minimum Chi-Squared test
Chamberlain [Chamberlain, G., 1982. Multivariate regression models for panel data. Journal of Econometrics 18, 5-46] showed that the fixed effects (FE) specification imposes testable restrictions on the coefficients from regressions of all leads and lags of dependent variables on all leads and lags of independent variables. Angrist and Newey [Angrist, J.D., Newey, W.K., 1991. Over-identification tests in earnings functions with fixed effects, Journal of Business & Economic Statistics 9, 317-323] suggested computing this test statistic as the degrees of freedom times the R2 from a regression of within residuals on all leads and lags of the exogenous variables. Despite the simplicity of these tests, they are not commonly used in practice. Instead, a Hausman [Hausman, J.A., 1978. Specification tests in econometrics, Econometrica 46, 1251-1271] test is used based on a contrast of the fixed and random effects specifications. We advocate the use of Chamberlain test if the researcher wants to settle on the FE specification and we check this test's performance using Monte Carlo experiments and we apply it to the crime example of Cornwell and Trumbull [Cornwell, C., Trumbull, W.N., 1994. Estimating and economic model of crime with panel data. Review of Economics and Statistics 76, 360-366].
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 79 (2009)
Issue (Month): 10 (May)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/622892/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Angrist, Joshua D & Newey, Whitney K, 1991. "Over-Identification Tests in Earnings Functions with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 317-23, July.
- J. A. Hausman & W. E. Taylor, 1980.
"Panel Data and Unobservable Individual Effects,"
255, Massachusetts Institute of Technology (MIT), Department of Economics.
- Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
- Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
- Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October.
- Cardellichio, Peter A, 1990. "Estimation of Production Behavior Using Pooled Microdata," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 11-18, February.
- Cornwell, Christopher & Trumbull, William N, 1994. "Estimating the Economic Model of Crime with Panel Data," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 360-66, May.
- Owusu-Gyapong, Anthony, 1986. "Alternative Estimating Techniques for Panel Data on Strike Activity," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 526-31, August.
- Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
- Hausman, Jerry A, 1978.
"Specification Tests in Econometrics,"
Econometric Society, vol. 46(6), pages 1251-71, November.
When requesting a correction, please mention this item's handle: RePEc:eee:stapro:v:79:y:2009:i:10:p:1358-1362. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.