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The Spatial Random Effects and the Spatial Fixed Effects Model. The Hausman Test in a Cliff and Ord Panel Model

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Author Info
Mutl, Jan (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
Pfaffermayr, Michael (Department of Economics, University of Innsbruck, Innsbruck, Austria and Austrian Institute of Economic Research, Vienna, Austria and CESIFO, Germany)

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Abstract

This paper studies the spatial random effects and spatial fixed effects model. The model includes a Cliff and Ord type spatial lag of the dependent variable as well as a spatially lagged one-way error component structure, accounting for both heterogeneity and spatial correlation across units. We discuss instrumental variable estimation under both the fixed and the random effects specification and propose a spatial Hausman test which compares these two models accounting for spatial autocorrelation in the disturbances. We derive the large sample properties of our estimation procedures and show that the test statistic is asymptotically chi-square distributed. A small Monte Carlo study demonstrates that this test works well even in small panels.

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File URL: http://www.ihs.ac.at/publications/eco/es-229.pdf
File Format: application/pdf
File Function: First version, 2008
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Publisher Info
Paper provided by Institute for Advanced Studies in its series Economics Series with number 229.

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Length: 34 pages, Appendix
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:ihs:ihsesp:229

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Related research
Keywords: Spatial econometrics; Panel data; Random effects estimator; Within estimator; Hausman test;

Find related papers by JEL classification:
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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This page was last updated on 2009-11-27.

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