IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v131y2015icp12-15.html
   My bibliography  Save this article

The impact of a Hausman pretest, applied to panel data, on the coverage probability of confidence intervals

Author

Listed:
  • Kabaila, Paul
  • Mainzer, Rheanna
  • Farchione, Davide

Abstract

In the analysis of panel data that includes a time-varying covariate, a Hausman pretest is commonly used to decide whether subsequent inference is made using the random effects model or the fixed effects model. We consider the effect of this pretest on the coverage probability of a confidence interval for the slope parameter. We prove three new finite sample theorems that make it easy to assess, for a wide variety of circumstances, the effect of the Hausman pretest on the minimum coverage probability of this confidence interval.

Suggested Citation

  • Kabaila, Paul & Mainzer, Rheanna & Farchione, Davide, 2015. "The impact of a Hausman pretest, applied to panel data, on the coverage probability of confidence intervals," Economics Letters, Elsevier, vol. 131(C), pages 12-15.
    • Handle: RePEc:eee:ecolet:v:131:y:2015:i:c:p:12-15
    DOI: 10.1016/j.econlet.2015.03.031
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176515001329
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2015.03.031?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
    2. Maddala, G S, 1971. "The Use of Variance Components Models in Pooling Cross Section and Time Series Data," Econometrica, Econometric Society, vol. 39(2), pages 341-358, March.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. Guggenberger, Patrik, 2010. "The impact of a Hausman pretest on the size of a hypothesis test: The panel data case," Journal of Econometrics, Elsevier, vol. 156(2), pages 337-343, June.
    5. Guggenberger, Patrik, 2010. "The Impact Of A Hausman Pretest On The Asymptotic Size Of A Hypothesis Test," Econometric Theory, Cambridge University Press, vol. 26(2), pages 369-382, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul Kabaila & Davide Farchione & Samer Alhelli & Nathan Bragg, 2021. "The effect of a Durbin–Watson pretest on confidence intervals in regression," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 75(1), pages 4-23, February.
    2. Doko Tchatoka, Firmin & Wang, Wenjie, 2021. "Uniform Inference after Pretesting for Exogeneity with Heteroskedastic Data," MPRA Paper 106408, University Library of Munich, Germany.
    3. Doko Tchatoka, Firmin & Wang, Wenjie, 2020. "Uniform Inference after Pretesting for Exogeneity," MPRA Paper 99243, University Library of Munich, Germany.
    4. Nils Grashof, 2020. "Sinking or swimming in the cluster labour pool? A firm-specific analysis of the effect of specialized labour," Jena Economics Research Papers 2020-006, Friedrich-Schiller-University Jena.
    5. Firmin DOKO TCHATOKA & Jean-Marie DUFOUR, 2016. "Exogeneity Tests, Incomplete Models, Weak Identification and Non-Gaussian Distributions : Invariance and Finite-Sample Distributional Theory," Cahiers de recherche 14-2016, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    6. Bartolucci, Francesco & Bacci, Silvia & Pigini, Claudia, 2017. "Misspecification test for random effects in generalized linear finite-mixture models for clustered binary and ordered data," Econometrics and Statistics, Elsevier, vol. 3(C), pages 112-131.
    7. Paul Kabaila & Rheanna Mainzer & Davide Farchione, 2017. "Conditional assessment of the impact of a Hausman pretest on confidence intervals," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 71(4), pages 240-262, November.
    8. Doko Tchatoka, Firmin & Dufour, Jean-Marie, 2020. "Exogeneity tests, incomplete models, weak identification and non-Gaussian distributions: Invariance and finite-sample distributional theory," Journal of Econometrics, Elsevier, vol. 218(2), pages 390-418.
    9. Wang, Yun & Zhang, Yonghui & Zhou, Qiankun, 2016. "A Stein-like estimator for linear panel data models," Economics Letters, Elsevier, vol. 141(C), pages 156-161.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chatelain, Jean-Bernard & Ralf, Kirsten, 2021. "Inference on time-invariant variables using panel data: A pretest estimator," Economic Modelling, Elsevier, vol. 97(C), pages 157-166.
    2. Paul Kabaila & Rheanna Mainzer & Davide Farchione, 2017. "Conditional assessment of the impact of a Hausman pretest on confidence intervals," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 71(4), pages 240-262, November.
    3. Leslie E. Papke & Jeffrey M. Wooldridge, 2023. "A simple, robust test for choosing the level of fixed effects in linear panel data models," Empirical Economics, Springer, vol. 64(6), pages 2683-2701, June.
    4. Bartolucci, Francesco & Bacci, Silvia & Pigini, Claudia, 2017. "Misspecification test for random effects in generalized linear finite-mixture models for clustered binary and ordered data," Econometrics and Statistics, Elsevier, vol. 3(C), pages 112-131.
    5. Wang, Yun & Zhang, Yonghui & Zhou, Qiankun, 2016. "A Stein-like estimator for linear panel data models," Economics Letters, Elsevier, vol. 141(C), pages 156-161.
    6. Li, Haiqi & Chen, Xingyi & Liang, Jufang, 2022. "Shrinkage estimation of panel data models with interactive effects," Economics Letters, Elsevier, vol. 210(C).
    7. O'Brien, Raymond & Patacchini, Eleonora, 2003. "Testing the exogeneity assumption in panel data models with "non classical" disturbances," Discussion Paper Series In Economics And Econometrics 0302, Economics Division, School of Social Sciences, University of Southampton.
    8. Doko Tchatoka, Firmin & Dufour, Jean-Marie, 2020. "Exogeneity tests, incomplete models, weak identification and non-Gaussian distributions: Invariance and finite-sample distributional theory," Journal of Econometrics, Elsevier, vol. 218(2), pages 390-418.
    9. Woutersen, Tiemen & Hausman, Jerry A., 2019. "Increasing the power of specification tests," Journal of Econometrics, Elsevier, vol. 211(1), pages 166-175.
    10. Jan Ámos Víšek, 2015. "Estimating the Model with Fixed and Random Effects by a Robust Method," Methodology and Computing in Applied Probability, Springer, vol. 17(4), pages 999-1014, December.
    11. Firmin Doko Tchatoka & Wenjie Wang, 2020. "Uniform Inference after Pretesting for Exogeneity," School of Economics and Public Policy Working Papers 2020-05, University of Adelaide, School of Economics and Public Policy.
    12. Metcalf, Gilbert E., 1996. "Specification testing in panel data with instrumental variables," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 291-307.
    13. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    14. Pedro H. C. Sant'Anna & Qi Xu, 2023. "Difference-in-Differences with Compositional Changes," Papers 2304.13925, arXiv.org.
    15. Anders Skrondal & Sophia Rabe-Hesketh, 2022. "The Role of Conditional Likelihoods in Latent Variable Modeling," Psychometrika, Springer;The Psychometric Society, vol. 87(3), pages 799-834, September.
    16. Ranjita Pandey & Anoop Chaturvedi, 2016. "Bayesian Inference For State Space Model With Panel Data," Statistics in Transition new series, Główny Urząd Statystyczny (Polska), vol. 17(2), pages 211-219, June.
    17. Theodore Joyce & Andrew D. Racine & Naci Mocan, 1992. "The Consequences and Costs of Maternal Substance Abuse in New York City," NBER Working Papers 3987, National Bureau of Economic Research, Inc.
    18. Maria Elena Bontempi & Jan Ditzen, 2023. "GMM-lev estimation and individual heterogeneity: Monte Carlo evidence and empirical applications," Papers 2312.00399, arXiv.org, revised Dec 2023.
    19. Firmin Doko Tchatoka, 2015. "On bootstrap validity for specification tests with weak instruments," Econometrics Journal, Royal Economic Society, vol. 18(1), pages 137-146, February.
    20. Wooldridge, Jeffrey M., 2019. "Correlated random effects models with unbalanced panels," Journal of Econometrics, Elsevier, vol. 211(1), pages 137-150.

    More about this item

    Keywords

    Coverage probability; Fixed effects model; Hausman specification test; Panel data; Random effects model;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:131:y:2015:i:c:p:12-15. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.