Prediction Using Panel Data Regression with Spatial Random Effects
This paper considers some of the issues and difficulties relating to the use of spatial panel data regression in prediction, illustrated by the effects of mass immigration on wages and income levels in local authority areas of Great Britain. Motivated by contemporary urban economics theory, and using recent advances in spatial econometrics, the panel regression has wages dependent on employment density and the efficiency of the labour force. There are two types of spatial interaction, a spatial lag of wages, and an autoregressive process for error components. The estimates suggest that increased employment densities will increase wage levels, but wages may fall if migrants are under-qualified. This uncertainty highlights the fact that ex ante forecasting should be used with great caution as a basis for policy decisions.
|Date of creation:||Sep 2008|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp|
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.:
- Rivera-Batiz, Francisco L., 1988. "Increasing returns, monopolistic competition, and agglomeration economies in consumption and production," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 125-153, February.
- Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, .
"Testing for PPP: Should We Use Panel Methods?,"
186, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- John M. Quigley, 1998. "Urban Diversity and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 127-138, Spring.
- Antonio Ciccone & Robert E. Hall, 1993.
"Productivity and the Density of Economic Activity,"
NBER Working Papers
4313, National Bureau of Economic Research, Inc.
- Kelejian, Harry H. & Prucha, Ingmar R., 2007. "The relative efficiencies of various predictors in spatial econometric models containing spatial lags," Regional Science and Urban Economics, Elsevier, vol. 37(3), pages 363-374, May.
- Badi H. Baltagi & Dong Li, 2006.
"Prediction in the Panel Data Model with Spatial Correlation: The Case of Liquor,"
Center for Policy Research Working Papers
84, Center for Policy Research, Maxwell School, Syracuse University.
- Badi Baltagi & Dong Li, 2006. "Prediction in the Panel Data Model with Spatial Correlation: the Case of Liquor," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(2), pages 175-185.
- Luciano Gutierrez, 2003.
"Panel Unit Roots Tests for Cross-Sectionally Correlated Panels: A Monte Carlo Comparison,"
- Luciano Gutierrez, 2006. "Panel Unit-root Tests for Cross-sectionally Correlated Panels: A Monte Carlo Comparison," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 519-540, 08.
- James P. LeSage & R. Kelley Pace, 2004. "Models for Spatially Dependent Missing Data," The Journal of Real Estate Finance and Economics, Springer, vol. 29(2), pages 233-254, 09.
- 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.
- Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I.
When requesting a correction, please mention this item's handle: RePEc:cep:sercdp:0007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.