Breusch Pegan LM test prov-value 1.0000

[ameen shaikh]

Dear forum fellows,

I would appreciate if you please give me your expert opinion on one of the problem I am facing.
I have 9 Independent variables, 13 countries, 25 years and unbalanced panel data.
While using LM test to decide in between OLS or Random effect model, I am getting prob-value 1.0000. How should I deal with this issue. I have also identified that both OLS and Random results are identical.

Looking for your best comments. appreciate if you please explain how I should I proceed further.

These are test results

xttest0

Breusch and Pagan Lagrangian multiplier test for random effects

bond2gdp[code,t] = Xb + u[code] + e[code,t]

Estimated results:
| Var sd = sqrt(Var)
---------+-----------------------------
bond2gdp | 7.93203 2.816386
e | 3.409645 1.846523
u | 0 0

Test: Var(u) = 0
chibar2(01) = 0.00
Prob > chibar2 = 1.0000

Thanking you

[Carlo Lazzaro]

Ameen:
welcome to this forum.
Provided that you made all the necessary tests aimed at investigating any possible cause of misspecification, the result of -xttest0- points you top a pooled OLS, as your data do not show any evidence of panel-wise effect-

[ameen shaikh]

Thank you so much Prof. Carlo for your response.
By the way do you think that I can get supporting justification from somewhere on "the result of -xttest0- as 1.0000 is OK". I need the justification for my thesis. I am afraid that researcher normally do not report the LM test result in their papers, plus I have looked into couple of econometric books (Gujarati, Wooldridge), but they are full of theoratical discussions and derivations of tests.

[Carlo Lazzaro]

Ameen:
you can justify your choice reporting the results of -xttest0-: as you cannot reject the null (no random effect), you can only switch to pooled OLS.
As an aside, please call me Carlo, just like all on (and many more off) this list do. Thanks.

[ameen shaikh]

Ok, thank you very much Carlo for your advise.