Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5058360 | Economics Letters | 2015 | 7 Pages |
â¢We propose a multilevel panel data model to incorporate both spatial effects and nested random effects.â¢We construct Lagrange multiplier test statistics for model diagnostic testing purpose.â¢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.