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The spatial time lag in panel data models

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  • Tao, Ji
  • Yu, Jihai

Abstract

This paper proposes to include the spatial time lag in empirical applications using spatial panel data models, and also explains why the coefficient of that term can be negative. We provide simple theoretical frameworks to justify the relevance of the spatial time lag to empirical specifications, which can be caused by either partial adjustments or inter-temporal budget constraints. Monte Carlo experiments suggest that omitting a relevant spatial time lag can result in significant biases in regression estimates, while including an irrelevant spatial time lag causes no obvious loss of efficiency.

Suggested Citation

  • Tao, Ji & Yu, Jihai, 2012. "The spatial time lag in panel data models," Economics Letters, Elsevier, vol. 117(3), pages 544-547.
  • Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:544-547 DOI: 10.1016/j.econlet.2012.07.025
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    References listed on IDEAS

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    Cited by:

    1. Kripfganz, Sebastian, 2014. "Unconditional Transformed Likelihood Estimation of Time-Space Dynamic Panel Data Models," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100604, Verein für Socialpolitik / German Economic Association.
    2. Ho, Chun-Yu & Wang, Wei & Yu, Jihai, 2013. "Growth spillover through trade: A spatial dynamic panel data approach," Economics Letters, Elsevier, vol. 120(3), pages 450-453.
    3. Han, Xiaoyi & Hsieh, Chih-Sheng & Lee, Lung-fei, 2017. "Estimation and model selection of higher-order spatial autoregressive model: An efficient Bayesian approach," Regional Science and Urban Economics, Elsevier, vol. 63(C), pages 97-120.
    4. Shi, Wei & Lee, Lung-fei, 2017. "Spatial dynamic panel data models with interactive fixed effects," Journal of Econometrics, Elsevier, vol. 197(2), pages 323-347.

    More about this item

    Keywords

    Spatial time lag; Spatial autoregression; Dynamic panels; Expenditures;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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