Simple tests for social interaction models with network structures

Osman Doğan*, Süleyman Taṣpınar, Anil K. Bera

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

Abstract

We consider an extended spatial autoregressive model that can incorporate possible endogenous interactions, exogenous interactions, unobserved group fixed effects and the correlation of unobservables. In the generalized method of moments (GMM) and the maximum likelihood (ML) frameworks, we introduce simple gradient-based robust test statistics that can be used to test for the presence of the endogenous effects, the correlation of unobservables and the contextual effects. These test statistics are robust to local parametric misspecifications and only require consistent estimates from a transformed linear regression model to compute. We carry out an extensive Monte Carlo study to investigate the size and power properties of the proposed tests. The results show that the proposed tests have good finite sample properties, and are useful for testing the presence of the various effects in a social interaction model.

Original languageEnglish
Pages (from-to)212-246
Number of pages35
JournalSpatial Economic Analysis
Volume13
Issue number2
DOIs
Publication statusPublished - 3 Apr 2018
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2017 Regional Studies Association.

Funding

This research was supported, in part, under the National Science Foundation (NSF) [grant numbers CNS-0958379, CNS-0855217 and ACI-1126113] and the City University of New York High Performance Computing Center at the College of Staten Island.

FundersFunder number
City University of New York High Performance Computing Center at the College of Staten Island
National Science FoundationCNS-0958379, ACI-1126113, CNS-0855217

    Keywords

    • Lagrange multiplier (LM) tests
    • endogenous effects
    • generalized method of moments (GMM) inference
    • local misspecification
    • robust LM test
    • social interactions
    • spatial dependence

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