Publication Type

Journal Article

Version

acceptedVersion

Publication Date

10-2017

Abstract

This article considers a simple test for the correct specification of linear spatial autoregressive models, assuming that the choice of the weight matrix Wn is true. We derive the limiting distributions of the test under the null hypothesis of correct specification and a sequence of local alternatives. We show that the test is free of nuisance parameters asymptotically under the null and prove the consistency of our test. To improve the finite sample performance of our test, we also propose a residual-based wild bootstrap and justify its asymptotic validity. We conduct a small set of Monte Carlo simulations to investigate the finite sample properties of our tests. Finally, we apply the test to two empirical datasets: the vote cast and the economic growth rate. We reject the linear spatial autoregressive model in the vote cast example but fail to reject it in the economic growth rate example. Supplementary materials for this article are available online.

Keywords

Generalized method of moments, Nonlinearity, Spatial autoregression, Spatial dependence, Specification test

Discipline

Econometrics

Research Areas

Econometrics

Publication

Journal of Business and Economic Statistics

Volume

35

Issue

4

First Page

572

Last Page

584

ISSN

0735-0015

Identifier

10.1080/07350015.2015.1102734

Publisher

Taylor & Francis

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1080/07350015.2015.1102734

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