On Nontrivial Power of Panel Slope Homogeneity Tests in the Presence of Grouped Patterns

While the literature on grouped patterns in panel data analysis has received significant attention, little to no results are available on pretesting grouped patterns. In this paper, we show that available tools for testing slope homogeneity in panels can be used for this purpose. We provide local power analysis and highlight important limitations of the available testing frameworks. A short Monte Carlo study supports our theoretical findings.