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Spatial System Estimators for Panel Models: A Sensitivity and Simulation Study

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Author Info

  • Shuangzhe Liu

    () (University of Canberra, Australia)

  • Tiefeng Ma

    () (Southwestern University of Finance and Economics, China)

  • Wolfgang Polasek

    () (Institute for Advanced Studies, Austria; The Rimini Centre for Economic Analysis (RCEA), Italy)

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    Abstract

    System of panel models are popular models in applied sciences and the question of spatial errors has created the recent demand for spatial system estimation of panel models. Therefore we propose new diagnostic methods to explore if the spatial component will change significantly the outcome of non-spatial estimates of seemingly unrelated regression (SUR) systems. We apply a local sensitivity approach to study the behavior of generalized least squares (GLS) estimators in two spatial autoregression SUR system models: a SAR model with SUR errors (SAR-SUR) and a SUR model with spatial errors (SUR-SEM). Using matrix derivative calculus we establish a sensitivity matrix for spatial panel models and we show how a first order Taylor approximation of the GLS estimators can be used to approximate the GLS estimators in spatial SUR models. In a simulation study we demonstrate the good quality of our approximation results.

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    File URL: http://www.rcfea.org/RePEc/pdf/wp75_12.pdf
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    Bibliographic Info

    Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 75_12.

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    Date of creation: Nov 2012
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    Handle: RePEc:rim:rimwps:75_12

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    Related research

    Keywords: Seemingly unrelated regression models; panel systems with spatial errors; SAR and SEM models; generalized least-squares estimators; Taylor approximations;

    This paper has been announced in the following NEP Reports:

    References

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    1. Luc Anselin, 2010. "Thirty years of spatial econometrics," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 3-25, 03.
    2. 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.
    3. repec:wop:ubisop:0081 is not listed on IDEAS
    4. Neudecker, Heinz & Polasek, Wolfgang & Liu, Shuangzhe, 1995. "The heteroskedastic linear regression model and the Hadamard product a note," Journal of Econometrics, Elsevier, vol. 68(2), pages 361-366, August.
    5. Liu, Shuangzhe & Polasek, Wolfgang & Sellner, Richard, 2011. "Sensitivity Analysis of SAR Estimators," Economics Series 262, Institute for Advanced Studies.
    6. Lee, Lung-fei & Yu, Jihai, 2010. "Some recent developments in spatial panel data models," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 255-271, September.
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