Breitung, Joerg, Roling, Christoph and Salish, Nazarii ORCID: 0000-0002-0682-1753 (2016). Lagrange multiplier type tests for slope homogeneity in panel data models. Econom. J., 19 (2). S. 166 - 203. HOBOKEN: WILEY-BLACKWELL. ISSN 1368-423X

Full text not available from this repository.


In this paper, we employ the Lagrange multiplier (LM) principle to test parameter homogeneity across cross-section units in panel data models. The test can be seen as a generalization of the Breusch-Pagan test against random individual effects to all regression coefficients. While the original test procedure assumes a likelihood framework under normality, several useful variants of the LM test are presented to allow for non-normality, heteroscedasticity and serially correlated errors. Moreover, the tests can be conveniently computed via simple artificial regressions. We derive the limiting distribution of the LM test and show that if the errors are not normally distributed, the original LM test is asymptotically valid if the number of time periods tends to infinity. A simple modification of the score statistic yields an LM test that is robust to non-normality if the number of time periods is fixed. Further adjustments provide versions of the LM test that are robust to heteroscedasticity and serial correlation. We compare the local power of our tests and the statistic proposed by Pesaran and Yamagata. The results of the Monte Carlo experiments suggest that the LM-type test can be substantially more powerful, in particular, when the number of time periods is small.

Item Type: Journal Article
CreatorsEmailORCIDORCID Put Code
URN: urn:nbn:de:hbz:38-272644
DOI: 10.1111/ectj.12070
Journal or Publication Title: Econom. J.
Volume: 19
Number: 2
Page Range: S. 166 - 203
Date: 2016
Place of Publication: HOBOKEN
ISSN: 1368-423X
Language: English
Faculty: Unspecified
Divisions: Unspecified
Subjects: no entry
Uncontrolled Keywords:
Economics; Mathematics, Interdisciplinary Applications; Social Sciences, Mathematical Methods; Statistics & ProbabilityMultiple languages
Refereed: Yes


Downloads per month over past year



Actions (login required)

View Item View Item