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Egger, Peter ; Larch, Mario ; Pfaffermayr, Michael ; Walde, Janette:
Small Sample Properties of Maximum Likelihood versus Generalized Method of Moments based Tests for Spatially Autocorrelated Errors.
In: Regional Science and Urban Economics.
Bd. 39
(2009)
Heft 6
.
- S. 670-678.
ISSN 0166-0462
DOI: https://doi.org/10.1016/j.regsciurbeco.2008.09.003
Abstract
Many applied researchers have to deal with spatially autocorrelated residuals (SAR). Available tests that identify spatial spillovers as captured by a significant SAR parameter, are either based on maximum likelihood (MLE) or generalized method of moments (GMM) estimates. This paper illustrates the properties of various tests for the null hypothesis of a zero SAR parameter in a comprehensive Monte Carlo study. The main finding is that Wald tests generally perform well regarding both size and power even in small samples. The GMM-based Wald test is correctly sized even for non-normally distributed disturbances and small samples, and it exhibits a similar power as its MLE-based counterpart. Hence, for the applied researcher the GMM Wald test can be recommended, because it is easy to implement.