This paper proposes new simple testing procedures for the joint null hypothesis of absence of persistent e®ects in the form of random e®ects and ¯rst order serial correlation in the error component model. The fact that the presence of random effects is clearly of a one-sided nature, together...

This paper shows that the standard Newey-West GMM based test is sensitive to the presence of locally misspecified alternatives. In particular, such test is shown to have incorrect size when the null model is locally contaminated, making the test spuriously reject the null hypothesis even when it...

This paper proposes simple tests to detect dynamic and random effects in linear panel data models, in the form of lagged dependent variables and random effects. We use the analytical framework of Bera and Yoon (1993) to derive tests for the presence of random effects, lagged dependent variables,...