On the Finite Sample Properties of Pre-test Estimators of Spatial Models
AbstractThis paper explores the properties of pre-tst strategies in estimating a linear Cliff-Ord -type spatial model when the researcher is unsure about the nature of the spatial dependence. More specifically, the paper explores the finite sample properties of the pre-test estimators introduced in Florax et al. (2003), which are based on Lagrange Multiplier (LM) tests, within the context of a Monte Carlo study. The performance of those estimators is compared with that of the maximum likelihood (ML) estimator of the encompassing model. We find that, even in a very simple setting, the bias of the estimates generated by pre-testing strategies can be very large in some cases and the empirical size of tests can differ substantially from the nominal size. This is in contrast to the ML estimator.
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Bibliographic InfoPaper provided by Regional Research Institute, West Virginia University in its series Working Papers with number 201307.
Length: 22 pages
Date of creation: Jul 2013
Date of revision:
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More information through EDIRC
cliff-ord; spatial; model; lagrange multiplier; monte carlo;
Find related papers by JEL classification:
- C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-06-07 (All new papers)
- NEP-ECM-2014-06-07 (Econometrics)
- NEP-ORE-2014-06-07 (Operations Research)
- NEP-URE-2014-06-07 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Badi H. Baltagi & Long Liu, 2008.
"Testing for Random Effects and Spatial Lag Dependence in Panel Data Models,"
Center for Policy Research Working Papers
102, Center for Policy Research, Maxwell School, Syracuse University.
- Baltagi, Badi H. & Liu, Long, 2008. "Testing for random effects and spatial lag dependence in panel data models," Statistics & Probability Letters, Elsevier, vol. 78(18), pages 3304-3306, December.
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