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Generalized Moments Estimation for Panel Data

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  • Viliam Druska
  • William C. Horrace

Abstract

This paper considers estimation of a panel data model with disturbances that are autocorrelated across cross-sectional units. It is assumed that the disturbances are spatially correlated, based on some geographic or economic proximity measure. If the time dimension of the data is large, feasible and efficient estimation proceeds by using the time dimension to estimate spatial dependence parameters. For the case where the time dimension is small (the usual panel data case), we develop a generalized moments estimation approach that is a straight-forward generalization of a cross-sectional model due to Kelejian and Prucha. We apply this approach in a stochastic frontier framework to a panel of Indonesian rice farms where spatial correlations are based on geographic proximity, altitude and weather. The correlations represent productivity shock spillovers across the rice farms in different villages on the island of Java. Test statistics indicate that productivity shock spillovers may exist in this (and perhaps other) data sets, and that these spillovers have effects on technical efficiency estimation and ranking.

Suggested Citation

  • Viliam Druska & William C. Horrace, 2003. "Generalized Moments Estimation for Panel Data," NBER Technical Working Papers 0291, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberte:0291 Note: TWP
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    References listed on IDEAS

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    1. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-533, May.
    2. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-965, July.
    3. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, pages 155-155.
    4. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-374, October.
    5. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Robert B. Barsky & J. Bradford De Long, 1991. "Forecasting Pre-World War I Inflation: The Fisher Effect and the Gold Standard," The Quarterly Journal of Economics, Oxford University Press, pages 815-836.
    7. Anselin, Luc & Bera, Anil K. & Florax, Raymond & Yoon, Mann J., 1996. "Simple diagnostic tests for spatial dependence," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 77-104, February.
    8. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
    9. William C. Horrace & Peter Schmidt, 2002. "Confidence Statements for Efficiency Estimates from Stochastic Frontier Models," Econometrics 0206006, EconWPA.
    10. Kumbhakar, Subal C., 1990. "Production frontiers, panel data, and time-varying technical inefficiency," Journal of Econometrics, Elsevier, pages 201-211.
    11. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, pages 155-155.
    12. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, pages 334-338.
    13. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, pages 21-37.
    14. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, pages 185-200.
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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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