Testing for serial correlation in linear panel-data models
David M. Drukker
Stata Corporation
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Abstract. Because serial correlation in linear panel-data models biases the standard
errors and causes the results to be less efficient, researchers need to
identify serial correlation in the idiosyncratic error term in a panel-data
model. A new test for serial correlation in random- or fixed-effects one-way
models derived by Wooldridge (2002) is attractive because it can be applied
under general conditions and is easy to implement. This paper presents
simulation evidence that the new Wooldridge test has good size and power
properties in reasonably sized samples.
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David M. Drukker
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panel data, serial correlation, specification tests
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