This paper is concerned with sphericity test for the two-way error components panel data model. It is found that the John statistic and the bias-corrected LM statistic recently developed by Baltagi et al. (2011, 2012), which are based on the within residuals, are not helpful under the present...

This paper proposes two statistics for testing error cross-sectional independence in a static linear heterogeneous panel data model by virtue of PAR (Pairwise Augmented Regressions). The tests based on the two statistics are extensions to the CD test Pesaran (2004) and the bias-adjusted LM test...