A Consistent LM Type Specification Test for Semiparametric Panel Data\n Models

2019/09/12 by И.Б. Королев, Korolev, Ivan
Economics, Econometrics and Finance · #Climate Change Policy and Economics #Econometrics (econ.EM) #FOS: Economics and business #Global trade and economics #Spatial and Panel Data Analysis

paper · pdf · doi:10.48550/arxiv.1909.05649

openalex publication_date 2019/09/12 · openalex created_date 2022/07/13 · openalex updated_date 2026/07/28

Abstract

This paper develops a consistent series-based specification test for\nsemiparametric panel data models with fixed effects. The test statistic\nresembles the Lagrange Multiplier (LM) test statistic in parametric models and\nis based on a quadratic form in the restricted model residuals. The use of\nseries methods facilitates both estimation of the null model and computation of\nthe test statistic. The asymptotic distribution of the test statistic is\nstandard normal, so that appropriate critical values can easily be computed.\nThe projection property of series estimators allows me to develop a degrees of\nfreedom correction. This correction makes it possible to account for the\nestimation variance and obtain refined asymptotic results. It also\nsubstantially improves the finite sample performance of the test.\n

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