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Testing for slope heterogeneity in Stata

Author

Listed:
  • Tore Bersvendsen

    (University of Agder, Kristiansand, Norway)

  • Jan Ditzen

    (Free University of Bozen-Bolzano)

Abstract

In this article, we introduce a new community-contributed command, xthst, to test for slope heterogeneity in panels with many observations over cross-sectional units and time periods. The command implements such a test, the delta test (Pesaran and Yamagata, 2008, Journal of Econometrics 142: 50–93). Under its null, slope coefficients are homogeneous across cross-sectional units. Under the alternative, slope coefficients are heterogeneous in the cross-sectional dimension. xthst also includes two extensions. The first is a heteroskedasticity- and autocorrelation-consistent robust test along the lines of Blomquist and Westerlund (2013, Economics Letters 121: 374–378). The second extension is a cross-sectional-dependence robust version. We discuss all tests and present examples using an economic growth model. A Monte Carlo simulation shows that the size and the power behave as expected.

Suggested Citation

  • Tore Bersvendsen & Jan Ditzen, 2021. "Testing for slope heterogeneity in Stata," Stata Journal, StataCorp LP, vol. 21(1), pages 51-80, March.
    • Handle: RePEc:tsj:stataj:v:21:y:2021:i:1:p:51-80
    DOI: 10.1177/1536867X211000004
    Note: to access software from within Stata, net describe http://www.stata-journal.com/software/sj21-1/st0627/
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