Fixed, random, or something in between? A variant of HAUSMAN's specification test for panel data estimators
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Date
2010-02-02T10:40:37Z
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Abstract
This paper proposes a variant of the classical HAUSMAN specification test
commonly employed to decide whether the estimation of a random-effects model is
a viable alternative to estimating fixed effects. Whereas the classical test probes the equality of fixed- and random effects, the proposed variant focuses on the equality of between-groups and fixed-effects coefficients. While both test procedures lead to the same conclusions, the panel model specification underlying our testing strategy facilitates the simultaneous estimation of the fixed- and between-groups effects. As a consequence, we are able to examine both the equality of the whole range of coefficients as well as that of individual variables. The usefulness of the test is illustrated using a panel of household travel data for Germany.
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Keywords
Fuel price elasticity, Specification tests