Spatial Correlation Testing for Errors in Panel Data Regression Model

To investigate the spatial error correlation in panel regression models, various statistical hypothesizes and testings have been proposed. This paper, within introduction to spatial panel data regression model, existence of spatial error correlation and random effects is investigated by a joint Lagrange Multiplier test, which simultaneously tests their existence. For this purpose, joint Lagrange Multiplier test statistic and its asymptotic distribution is introduced. A simulation study is performed for considering the size and power of the test this test for joint hypothesizes. Then the application of this test is shown with investigating spatial errors correlation and random effects in data of agricultural product exports of ECO member states. Finally, discussion and conclusion are given.