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What is WuHausman Test

Chapter 12
Handbook of Research on Military Expenditure on Economic and Political Resources
In order to decide whether fixed effect model or the random effect model is suitable, we consider the Wu Hausman test. The Wu Housman specification test compares the fixed effect and random effect model and it thus decides which model will be follow in our analysis. The null hypothesis of the test states that the random effect model is true. If the value of Hausman test statistic is large, the difference between estimates is significant, so null hypothesis that random effect model is consistent and it is rejected then the fixed effect estimators are used. If the value of Hausman test statistics is small, then random effect estimators is more appropriate.
Published in Chapter:
FDI Inflows and Military Expenditure: A Study Across the Emerging Market Economies
Debabrata Mukhopadhyay (West Bengal State University, India) and Dipankar Das (West Bengal State University, India)
Copyright: © 2018 |Pages: 15
DOI: 10.4018/978-1-5225-4778-5.ch012
Abstract
This chapter attempts to investigate the effect of military expenditure on FDI inflows in the 15 emerging market economies over the year 2002 to 2015. Military expenditure takes away scarce public resources, which could have been used for the development of crucial physical and social infrastructure leads to have a negative impact on FDI inflows. The authors have followed both the static and dynamic panel data methodology along with other relevant macroeconomic variables for this exercise. They have found from their analysis that military expenditure is statistically significant on FDI inflows in emerging economies over the year 2002 to 2015. The authors have also examined the relationship between military spending and FDI inflows in the context of economic growth across the emerging economies during the period 2002 to 2014. It has also been found that the military expenditure has a significant impact on FDI inflows in special reference to BRICS countries.
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