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A J-Test for Panel Models with Fixed Effects, Spatial and Time

Author

Listed:
  • Harry H. Kelejian

    (Department of Economics, University of Maryland)

  • Gianfranco Piras

    (Regional Research Institute, West Virginia University)

Abstract
In this paper we suggest a J-test in a spatial panel framework of a null model against one or more alternatives. The null model we consider has fixed effects, along with spatial and time dependence. The alternatives can have either fixed or random effects. We implement our procedure to test the specifications of a demand for cigarette model. We find that the most appropriate specification is one that contains the average price of cigarettes in neighboring states, as well as the spatial lag of the dependent variable. Along with formal large sample results, we also give small sample Monte Carlo results. Our large samples results are based on the assumption N ? 8 and T is fixed. Our Monte Carlo results suggest that our proposed J-test has good power, and proper size even for small to moderately sized samples.

Suggested Citation

  • Harry H. Kelejian & Gianfranco Piras, 2013. "A J-Test for Panel Models with Fixed Effects, Spatial and Time," Working Papers Working Paper 2013-03, Regional Research Institute, West Virginia University.
    • Handle: RePEc:rri:wpaper:2013wp03
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    File URL: https://researchrepository.wvu.edu/rri_pubs/11/
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    spatial panel models; fixed effects; time and spatial lags; non-nested j-test;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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