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Bootstrap J -Test for Panel Data Models with Spatially Dependent Error Components, a Spatial Lag and Additional Endogenous Variables

Listed author(s):
  • Bernard Fingleton
  • Silvia Palombi

We develop a bootstrap J -test method for testing a panel model against one non-nested alternative when the competing specifications are estimated by Feasible Generalised Spatial Two Stage Least Squares/Generalised Method of Moments (FGS2SLS/GMM). Both models incorporate spatially correlated error components, thus accounting for spatial heterogeneity via random effects, and accommodate endogenous regressors other than the spatially lagged dependent variable. The proposed scheme is applied to a testing problem involving non-nested wage equations as motivated by the Wage Curve literature and the New Economic Geography theory. Results show that our bootstrap test is a reliable and effective procedure for correcting asymptotic reference critical values and distinguishing between the two rival hypotheses.

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Article provided by Taylor & Francis Journals in its journal Spatial Economic Analysis.

Volume (Year): 11 (2016)
Issue (Month): 1 (March)
Pages: 7-26

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Handle: RePEc:taf:specan:v:11:y:2016:i:1:p:7-26
DOI: 10.1080/17421772.2016.1102960
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