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A Spatial Dynamic Panel Data Model With Both Time And Individual Fixed Effects

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  • Lee, Lung-fei
  • Yu, Jihai

Abstract

This paper establishes asymptotic properties of quasi-maximum likelihood estimators for spatial dynamic panel data with both time and individual fixed effects when the number of individuals n and the number of time periods T can be large. We propose a data transformation approach to eliminate the time effects. When n / T → 0, the estimators are null consistent and asymptotically centered normal; when n is asymptotically proportional to T , they are null consistent and asymptotically normal, but the limit distribution is not centered around 0; when n / T → ∞, the estimators are consistent with rate T and have a degenerate limit distribution. We also propose a bias correction for our estimators. When n 1/3 / T → 0, the correction will asymptotically eliminate the bias and yield a centered confidence interval. The estimates from the transformation approach can be consistent when n is a fixed finite number.

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  • Lee, Lung-fei & Yu, Jihai, 2010. "A Spatial Dynamic Panel Data Model With Both Time And Individual Fixed Effects," Econometric Theory, Cambridge University Press, vol. 26(02), pages 564-597, April.
  • Handle: RePEc:cup:etheor:v:26:y:2010:i:02:p:564-597_10
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