Specification Tests in Panel Data Models Using Artificial Regressions

This paper surveys some applications of artificial regressions including the Gauss-Newton, Double-Length and Binary Response Model regressions as testing tools for panel data models. In addition, several other artificial regression tests are reviewed including Hausman's [1978] specification test, Chamberlain's [1982] omnibus goodness-of-fit test and Wooldridge's [1995] simple variable addition tests for selection bias. The important point to emphasize is that in many cases these artificial regressions provide the easiest way to compute specification tests, and in most cases provide a reasonably easy way to do so.