Testing for cross-sectional dependence in regional panel data

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Resumé

We examine three tests of cross-sectional dependence and apply them to a Danish regional panel dataset with few time periods and a large cross-section: the CD test due to Pesaran (2004), the Schott test and the Liu–Lin–Shao test. We show that the CD test and the Schott test have good properties in a Monte Carlo study. When controlling for panel-specific and time-specific fixed effects, the Schott test is superior. Our application shows that there is cross-sectional dependence in regional employment growth across Danish regions. We also show that this dependence can be accounted for by time-specific fixed effects. Thus, the tests uncover new properties of the regional data.
OriginalsprogEngelsk
TidsskriftSpatial Economic Analysis
Vol/bind6
Udgave nummer4
Sider (fra-til)423-450
ISSN1742-1772
DOI
StatusUdgivet - 2011

Fingeraftryk

Panel Data
panel data
Testing
CD
Fixed Effects
employment trend
test
Cross-sectional dependence
Panel data
Monte Carlo Study
Cross section
cross section

Citer dette

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Testing for cross-sectional dependence in regional panel data. / Jensen, Peter Sandholt; Schmidt, Torben Dall.

I: Spatial Economic Analysis, Bind 6, Nr. 4, 2011, s. 423-450.

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

TY - JOUR

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AU - Jensen, Peter Sandholt

AU - Schmidt, Torben Dall

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N2 - We examine three tests of cross-sectional dependence and apply them to a Danish regional panel dataset with few time periods and a large cross-section: the CD test due to Pesaran (2004), the Schott test and the Liu–Lin–Shao test. We show that the CD test and the Schott test have good properties in a Monte Carlo study. When controlling for panel-specific and time-specific fixed effects, the Schott test is superior. Our application shows that there is cross-sectional dependence in regional employment growth across Danish regions. We also show that this dependence can be accounted for by time-specific fixed effects. Thus, the tests uncover new properties of the regional data.

AB - We examine three tests of cross-sectional dependence and apply them to a Danish regional panel dataset with few time periods and a large cross-section: the CD test due to Pesaran (2004), the Schott test and the Liu–Lin–Shao test. We show that the CD test and the Schott test have good properties in a Monte Carlo study. When controlling for panel-specific and time-specific fixed effects, the Schott test is superior. Our application shows that there is cross-sectional dependence in regional employment growth across Danish regions. We also show that this dependence can be accounted for by time-specific fixed effects. Thus, the tests uncover new properties of the regional data.

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DO - 10.1080/17421772.2011.610813

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SP - 423

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JO - Spatial Economic Analysis

JF - Spatial Economic Analysis

SN - 1742-1772

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