A Test For Heteroscedasticity in a Limited Dependent Variable Model

Limited Dependent Variable models arise, for example, when the dependent variable is necessarily non-negative. When these models are estimated under the incorrect assumption of homoscedasticity, serious consequences have been found. It is therefore important to test for its existence. In this paper, we make use of the Lagrange multiplier procedure to derive a test for heteroscedasticity in the Tobit model.