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Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. (English) Zbl 0719.62116
Summary: This paper presents specification tests that are applicable after estimating a dynamic model from panel data by the generalized method of moments (GMM), and studies the practical performance of these procedures using both generated and real data. Our GMM estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogeneous variables. We propose a test of serial correlation based on the GMM residuals and compare this with Sargan tests of over-identifying restrictions and Hausman specification tests.

62P20 Applications of statistics to economics
91B40 Labor market, contracts (MSC2010)
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