Serial Correlation and the Fixed Effects Model

descriptionPublicationkeyboard_double_arrow_right Article , Part of book or chapter of book 01 Oct 1982Publisher:Oxford University Press (OUP)Journal:The Review of Economic Studies, volume 49, page 533 (issn: 0034-6527,

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Authors: Bhargava, A.; Franzini, L.; Narendranathan, W.;

doi: 10.2307/2297285 , 10.1142/9789812773319_0004

Serial Correlation and the Fixed Effects Model

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Abstract

This paper generalizes the Durbin-Watson type statistics to test the OLS residuals from the fixed effects model for serial independence. Also generalized are the tests proposed by Sargan and Bhargava for the hypothesis that the residuals form a random walk. A method for efficient estimation of the parameters is also developed. Finally, an earnings function is estimated using the Michigan Survey of Income Dynamics in order to illustrate the uses of the tests and the estimation procedures developed in this paper.

Related Organizations

London School of Economics and Political Science
United Kingdom

Keywords

survey of income dynamics, tests of serial correlation, Linear regression; mixed models, Monte-Carlo methods, tests for random walk residuals, Durbin-Watson type statistics, panel data, fixed effects model, Statistical methods; economic indices and measures, OLS residuals, Applications of statistics to economics, GLS estimator

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