Wooldridge Test for AR(1) Errors in FE Panel Models
Test of serial correlation for (the idiosyncratic component of) the errors in fixed–effects panel models.
pwartest(x, ...) ## S3 method for class 'formula' pwartest(x, data, ...) ## S3 method for class 'panelmodel' pwartest(x, ...)
x |
an object of class |
... |
further arguments to be passed on to |
data |
a |
As Wooldridge (2010), Sec. 10.5.4 observes, under the null of no serial correlation in the errors, the residuals of a FE model must be negatively serially correlated, with cor(\hat{u}_{it}, \hat{u}_{is})=-1/(T-1) for each t,s. He suggests basing a test for this null hypothesis on a pooled regression of FE residuals on their first lag: \hat{u}_{i,t} = α + δ \hat{u}_{i,t-1} + η_{i,t}. Rejecting the restriction δ = -1/(T-1) makes us conclude against the original null of no serial correlation.
pwartest
estimates the within
model and retrieves residuals,
then estimates an AR(1) pooling
model on them. The test statistic
is obtained by applying a F test to the latter model to test the
above restriction on δ, setting the covariance matrix to
vcovHC
with the option method="arellano"
to control for serial
correlation.
An object of class "htest"
.
Giovanni Millo
Wooldridge JM (2002). Econometric Analysis of Cross–Section and Panel Data. MIT press.
Wooldridge JM (2010). Econometric Analysis of Cross–Section and Panel Data. MIT press.
data("EmplUK", package = "plm") pwartest(log(emp) ~ log(wage) + log(capital), data = EmplUK) # pass argument 'type' to vcovHC used in test pwartest(log(emp) ~ log(wage) + log(capital), data = EmplUK, type = "HC3")
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