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Estimation for spatial dynamic panel data with fixed effects: The case of spatial cointegration

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  • Yu, Jihai
  • de Jong, Robert
  • Lee, Lung-fei

Abstract

Yu et al. (2008) establish asymptotic properties of quasi-maximum likelihood estimators for a stable spatial dynamic panel model with fixed effects when both the number of individuals n and the number of time periods T are large. This paper investigates unstable cases where there are unit roots generated by temporal and spatial correlations. We focus on the spatial cointegration model where some eigenvalues of the data generating process are equal to 1 and the outcomes of spatial units are cointegrated as in a vector autoregressive system. The asymptotics of the QML estimators are developed by reparameterization, and bias correction for the estimators is proposed. We also consider the 2SLS and GMM estimations when T could be small.

Suggested Citation

  • Yu, Jihai & de Jong, Robert & Lee, Lung-fei, 2012. "Estimation for spatial dynamic panel data with fixed effects: The case of spatial cointegration," Journal of Econometrics, Elsevier, vol. 167(1), pages 16-37.
  • Handle: RePEc:eee:econom:v:167:y:2012:i:1:p:16-37
    DOI: 10.1016/j.jeconom.2011.05.014
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    4. Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
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    More about this item

    Keywords

    Spatial autoregression; Dynamic panels; Fixed effects; Quasi-maximum likelihood estimation; Bias correction; Generalized method of moments; Spatial cointegration; Unit root;
    All these keywords.

    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
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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