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Spatial dynamic game models for coevolution of intertemporal economic decision-making and spatial networks

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  • Jeong, Hanbat
  • Lee, Lung-fei

Abstract

This paper introduces a spatial panel data model describing local agents’ intertemporal decision-making with their network interactions and network evolution. Our model’s purpose is to give a tool to analyze local governments’ behaviors when there exist network interactions among them with endogenously changing networks. To provide a theoretical foundation of our model, we establish a network interaction model for forward-looking agents. An agent’s current action can affect his future network links via time-varying economic indicators. To estimate the model’s parameters, we consider a GMM estimation method based on first-order conditions of agents’ approximated lifetime problems. Asymptotic properties of the GMM estimator are studied for statistical inferences. Using our model, we find evidence of positive spillovers among U.S. states’ public welfare expenditures with coevolution between them and spatial-economic networks.

Suggested Citation

  • Jeong, Hanbat & Lee, Lung-fei, 2021. "Spatial dynamic game models for coevolution of intertemporal economic decision-making and spatial networks," Journal of Economic Dynamics and Control, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:dyncon:v:129:y:2021:i:c:s0165188921001214
    DOI: 10.1016/j.jedc.2021.104186
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    More about this item

    Keywords

    Forward-looking agents; Spatial dynamic panel data model; Endogenous networks; Euler equations; GMM Estimation; U.s. states’ public welfare expenditure;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions

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