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Testing for Cross-Sectional Dependence in a RandomEffects Model

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DOI: 10.4236/ojs.2012.21009    4,832 Downloads   7,766 Views   Citations

ABSTRACT

This paper extends and generalizes the works of [1,2] to allow for cross-sectional dependence in the context of a two-way error components model and consequently develops LM test. The cross-sectional dependence follows the first order spatial autoregressive error (SAE) process and is imposed on the remainder disturbances. It is important to note that this paper does not consider alternative forms of spatial lag dependence other than SAE. It also does not allow for endogeneity of the regressors and requires the normality assumption to derive the LM test.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

A. Salisu, S. Olofin and E. Kouassi, "Testing for Cross-Sectional Dependence in a RandomEffects Model," Open Journal of Statistics, Vol. 2 No. 1, 2012, pp. 88-97. doi: 10.4236/ojs.2012.21009.

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