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GMM estimation of spatial panels with fixed effects and unknown heteroskedasticity

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  • Moscone, F.
  • Tosetti, E.

Abstract

In this paper we consider the estimation of a panel data regression model with spatial autoregressive disturbances, fixed effects and unknown heteroskedasticity. Following the work by Kelejian and Prucha (1999), Lee and Liu (2006a) and others, we adopt the Generalized Method of Moments (GMM) and consider moments as a set of linear quadratic conditions in the disturbances. As in Lee and Liu (2006a), we assume that the inner matrices in the quadratic forms have zero diagonal elements to robustify moments against unknown heteroskedasticity. We derive the asymptotic distribution of the GMM estimator based on such conditions. Hence, we carry out some Monte Carlo experiments to investigate the small sample properties of GMM estimators based on various sets of moment conditions.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 41 (2011)
Issue (Month): 5 (September)
Pages: 487-497

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Handle: RePEc:eee:regeco:v:41:y:2011:i:5:p:487-497

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Related research

Keywords: Spatial panels Fixed effects GMM;

References

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  1. Qian, Hailong & Schmidt, Peter, 2003. "Partial GLS regression," Economics Letters, Elsevier, vol. 79(3), pages 385-392, June.
  2. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
  3. Irani Arraiz & David M. Drukker & Harry H. Kelejian & Ingmar R. Prucha, 2008. "A Spatial Cliff-Ord-type Model with Heteroskedastic Innovations: Small and Large Sample Results," CESifo Working Paper Series 2485, CESifo Group Munich.
  4. Kapoor, Mudit & Kelejian, Harry H. & Prucha, Ingmar R., 2007. "Panel data models with spatially correlated error components," Journal of Econometrics, Elsevier, vol. 140(1), pages 97-130, September.
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  7. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
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  11. Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
  12. Lee, Lung-fei, 2007. "GMM and 2SLS estimation of mixed regressive, spatial autoregressive models," Journal of Econometrics, Elsevier, vol. 137(2), pages 489-514, April.
  13. Viliam Druska & William C. Horrace, 2002. "Generalized Moments Estimation for Spatial Panel Data: Indonesian Rice Farming," Econometrics 0206004, EconWPA, revised 11 May 2003.
  14. Bernard Fingleton, 2008. "A Generalized Method of Moments Estimator for a Spatial Panel Model with an Endogenous Spatial Lag and Spatial Moving Average Errors," Spatial Economic Analysis, Taylor & Francis Journals, vol. 3(1), pages 27-44.
  15. Ullah, Aman, 2004. "Finite Sample Econometrics," OUP Catalogue, Oxford University Press, edition 1, number 9780198774488.
  16. Lin, Xu & Lee, Lung-fei, 2010. "GMM estimation of spatial autoregressive models with unknown heteroskedasticity," Journal of Econometrics, Elsevier, vol. 157(1), pages 34-52, July.
  17. Kelejian, Harry H. & Prucha, Ingmar R., 2007. "HAC estimation in a spatial framework," Journal of Econometrics, Elsevier, vol. 140(1), pages 131-154, September.
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