Testing for Persistence in the Error Component Model:A One-Sided Approach
This paper proposes new simple testing procedures for the joint null hypothesis of absence of persistent e®ects in the form of random e®ects and ¯rst order serial correlation in the error component model. The fact that the presence of random effects is clearly of a one-sided nature, together with the fact that in many empirical applications researchers worry about positive serial correlation leaves room for a power gain that arises from restricting the parameter space under the alternative hypothesis, compared to existing procedures that allow for two-sided alternatives. A Monte Carlo experiment shows that the proposed statistics have good size and power performance in very small samples like those typically used in applied work in panel data. An empirical example illustrates the usefulness of the proposed statistics.
|Date of creation:||Feb 2007|
|Date of revision:||Feb 2007|
|Contact details of provider:|| Postal: Vito Dumas 284, Victoria, Buenos Aires, B1644BID|
Web page: http://www.udesa.edu.ar
More information through EDIRC
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.:
- Gourieroux,Christian & Monfort,Alain, 1995.
"Statistics and Econometric Models,"
Cambridge University Press, number 9780521471626, December.
- Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521477451, December.
- Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521405515, December.
- Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521477444, December.
- Maxwell King & Ping Wu, 1997. "Locally optimal one-sided tests for multiparameter hypotheses," Econometric Reviews, Taylor & Francis Journals, vol. 16(2), pages 131-156.
- Anil Bera & Walter Sosa Escudero & Mann Yoon, 2000.
"Test for the Error Component Model in the Presence of Local Misspecification,"
Department of Economics, Working Papers
022, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
- Bera, Anil K. & Sosa-Escudero, Walter & Yoon, Mann, 2001. "Tests for the error component model in the presence of local misspecification," Journal of Econometrics, Elsevier, vol. 101(1), pages 1-23, March.
- Anil K. Bera & Walter Sosa Escudero & Mann Yoon, 2000. "Tests for the Error Component Model in the Presence of Local Misspecification," Econometric Society World Congress 2000 Contributed Papers 1888, Econometric Society.
- Baltagi, Badi H. & Li, Qi, 1991. "A joint test for serial correlation and random individual effects," Statistics & Probability Letters, Elsevier, vol. 11(3), pages 277-280, March.
- Walter Sosa-Escudero & Mariana Marchionni & Omar Arias, 2006.
"Sources of Income Persistence: Evidence from Rural El Salvador,"
CEDLAS, Working Papers
0037, CEDLAS, Universidad Nacional de La Plata.
- Walter Sosa-Escudero & Mariana Marchionni & Omar Arias, 2011. "Sources of Income Persistence: Evidence from Rural El Salvador," Journal of Income Distribution, Journal of Income Distribution, vol. 20(1), pages 3-28, March.
- Baltagi, Badi H. & Chang, Young-Jae & Li, Qi, 1992. "Monte Carlo results on several new and existing tests for the error component model," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 95-120.
- Yuzo Honda, 1985. "Testing the Error Components Model with Non-Normal Disturbances," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 681-690.
- Inoue, Atsushi & Solon, Gary, 2006.
"A Portmanteau Test For Serially Correlated Errors In Fixed Effects Models,"
Cambridge University Press, vol. 22(05), pages 835-851, October.
- Atsushi Inoue & Gary Solon, 2005. "A Portmanteau Test for Serially Correlated Errors in Fixed Effects Models," NBER Technical Working Papers 0310, National Bureau of Economic Research, Inc.
- Hendry, David F & Mizon, Grayham E, 1978. "Serial Correlation as a Convenient Simplification, not a Nuisance: A Comment on a Study of the Demand for Money by the Bank of England," Economic Journal, Royal Economic Society, vol. 88(351), pages 549-563, September.
- Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
- Breusch, T.S. & Pagan, A.R., "undated".
"The Lagrange multiplier test and its applications to model specification in econometrics,"
CORE Discussion Papers RP
412, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 239-253.
When requesting a correction, please mention this item's handle: RePEc:sad:wpaper:94. 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: (Tamara Sulaque)
If references are entirely missing, you can add them using this form.