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The University of Southampton
EconomicsPart of Economic, Social and Political Science

1307 Improved Langrange Multiplier Tests in Spatial Autogressions (F. Rossi & P. Robinson)

Improved Lagrange Multiplier Tests in Spatial Autoregressions

Authors: Francesca Rossi (University of Southampton) and Peter Robinson (London School of Economics).

Paper number 1307

For testing lack of correlation against spatial autoregressive alternatives, Lagrange multiplier tests enjoy their usual computational advantages, but the (X2) first-order asymptotic approximation to critical values can be poor in small samples. We develop refined tests for lack of spatial error correlation in regressions, based on Edgeworth expansion. In Monte Carlo simulations these tests, and bootstrap ones, generally significantly outperform X2  based tests.

JEL classification: C29

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