SIMPLE LM TESTS FOR THE UNBALANCED NESTED ERROR COMPONENT REGRESSION MODEL |
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| Authors: | Badi H Baltagi Seuck Heun Song Byoung Cheol Jung |
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| Institution: |
a Department of Economics, Texas A&M University, TX, U.S.A.
b Department of Statistics, Korea University, Sungbuk-Ku, Seoul, Korea
c Department of Economics, Korea University, Sungbuk-Ku, Seoul, Korea |
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| Abstract: | This paper derives several Lagrange Multiplier tests for the unbalanced nested error component model. Economic data with a natural nested grouping include firms grouped by industry; or students grouped by schools. The LM tests derived include the joint test for both effects as well as the test for one effect conditional on the presence of the other. The paper also derives the standardized versions of these tests, their asymptotic locally mean most powerful version as well as their robust to local misspecification version. Monte Carlo experiments are conducted to study the performance of these LM tests. |
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| Keywords: | Panel data Nested error component Unbalanced data LM tests |
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