Administrative Delegation of Budgetary Powers and Fiscal Performance

Abstract

Wooldridge (2010: chapter 10) has developed a test of serial correlation in panel data based on the residuals in the first-difference model. With no serial correlation, the relevant test statistic should equal-0.5. With perfect serial correlation, the test statistic equals 0. In the current case, the statistic equals-0.33, which is statistically different from-0.5 [F(1, 422) = 132.82]. It is therefore reassuring to see that the first-difference estimator yields results comparable to those reported thus far.