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LM Tests for Functional Form and Spatial Error Correlation

Author

Listed:
  • Badi H. Baltagi

    (Texas A&M University, Department of Economics, College Station, TX)

  • Dong Li

    (East Carolina University, Department of Economics, Greenville, NC)

Abstract

This paper derives Lagrangian multiplier (LM) tests to jointly test for functional form and spatial error correlation. In particular, this paper tests for linear and log-linear models with no spatial error dependence against a more general Box-Cox model with spatial error correlation. Conditional LM tests and modified Rao score tests that guard against local misspecification are also derived. These tests are easy to implement and are illustrated using Anselin’s crime data. The performance of these tests is also compared using Monte Carlo experiments.

Suggested Citation

  • Badi H. Baltagi & Dong Li, 2001. "LM Tests for Functional Form and Spatial Error Correlation," International Regional Science Review, , vol. 24(2), pages 194-225, April.
    • Handle: RePEc:sae:inrsre:v:24:y:2001:i:2:p:194-225
    DOI: 10.1177/016001760102400202
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    References listed on IDEAS

    as
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