The Spatial Random Effects and the Spatial Fixed Effects Model. The Hausman Test in a Cliff and Ord Panel Model
AbstractThis 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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Bibliographic InfoPaper provided by Institute for Advanced Studies in its series Economics Series with number 229.
Length: 34 pages, Appendix
Date of creation: Oct 2008
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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; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-11 (All new papers)
- NEP-ECM-2008-11-11 (Econometrics)
- NEP-GEO-2008-11-11 (Economic Geography)
- NEP-URE-2008-11-11 (Urban & Real Estate Economics)
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