Abstract
SUMMARY This paper deals with the performance of a simple test for the detection of unmeasured heterogeneity in regression models for panel data. It is assumed that the unmeasured heterogeneity can be modeled by an individual-specific random variable that does not vary over time. Conditionally on the individual-specific effects and the regressor variables, the distribution of the dependent variable is assumed to belong to a linear exponential family. This class of distributions includes linear models for continuous dependent variables as well as nonlinear models for discrete outcomes. The proposed test does not assume a special form of the distribution of the heterogeneity, and the test statistic can be calculated with available computer programs. The performance of the test is investigated in a simulation experiment.
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