A Nonparametric Poolability Test for Panel Data Models with Cross Section Dependence

• Main Authors: JIN, Sainan, SU, Liangjun
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2013
• Subjects: Common factor; Cross-section dependence; Poolability; Semiparametric panel data model; Sieve estimation; Test; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/1558; https://ink.library.smu.edu.sg/context/soe_research/article/2557/viewcontent/NonparametricTestsPoolabilityPanelDataModels_pp.pdf
• Institution: Singapore Management University

In this article we propose a nonparametric test for poolability in large dimensional semiparametric panel data models with cross-section dependence based on the sieve estimation technique. To construct the test statistic, we only need to estimate the model under the alternative. We establish the asymptotic normal distributions of our test statistic under the null hypothesis of poolability and a sequence of local alternatives, and prove the consistency of our test. We also suggest a bootstrap method as an alternative way to obtain the critical values. A small set of Monte Carlo simulations indicate the test performs reasonably well in finite samples.