Heteroskedasticity and non-normality robust LM tests for spatial dependence

Badi H. Baltagi, Zhenlin Yang

Research output: Contribution to journalArticlepeer-review

30 Scopus citations


The standard LM tests for spatial dependence in linear and panel regressions are derived under the normality and homoskedasticity assumptions of the regression disturbances. Hence, they may not be robust against non-normality or heteroskedasticity of the disturbances. Following Born and Breitung (2011), we introduce general methods to modify the standard LM tests so that they become robust against heteroskedasticity and non-normality. The idea behind the robustification is to decompose the concentrated score function into a sum of uncorrelated terms so that the outer product of gradient (OPG) can be used to estimate its variance. We also provide methods for improving the finite sample performance of the proposed tests. These methods are then applied to several popular spatial models. Monte Carlo results show that they work well in finite sample.

Original languageEnglish (US)
Pages (from-to)725-739
Number of pages15
JournalRegional Science and Urban Economics
Issue number5
StatePublished - Sep 2013


  • Centering
  • Heteroskedasticity
  • LM test
  • Non-normality
  • Panel model
  • Spatial dependence

ASJC Scopus subject areas

  • Economics and Econometrics
  • Urban Studies


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