Article ID Journal Published Year Pages File Type
5058360 Economics Letters 2015 7 Pages PDF
Abstract

•We propose a multilevel panel data model to incorporate both spatial effects and nested random effects.•We construct Lagrange multiplier test statistics for model diagnostic testing purpose.•We conduct Monte Carlo simulation to show good finite sample performances of these tests.

We propose a multilevel spatial econometric model including spatially correlated error, spatially lagged dependent variable, county-level random effects and nested district-level random effects within a county. We construct joint Lagrange multiplier (LM) test to detect both the spatial effects and the random effects, LM tests to detect the spatial error correlation and/or the spatial lag dependence allowing for both types of random effects, and LM tests to detect the county-level random effects and/or the nested district-level random effects allowing for both types of spatial effects. A Monte Carlo simulation is conducted to show their good finite sample performances.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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