Center for Policy Research
Working Paper
Testing For Spatial Lag and Spatial Error Dependence in a Fixed Effects Panel Data Model Using Double Length Artificial Regressions
Badi H. Baltagi & Long Liu
C.P.R. Working Paper 183
August 2015
Abstract
This paper revisits the joint and conditional Lagrange Multiplier (LM) tests derived by Debarsy and Ertur (2010) for a fixed effects spatial lag regression model with spatial auto-regressive error, and derives these tests using artificial Double Length Regressions (DLR). These DLR tests and their corresponding LM tests are compared using an empirical example and a Monte Carlo simulation.