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Efficient Maximum Likelihood Estimation of Spatial Autoregressive Models with Normal but Heteroskedastic Disturbances

  • Takahisa Yokoi

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    Likelihood functions of spatial autoregressive models with normal but heteroskedastic disturbances have been already derived [Anselin (1988, ch.6)]. But there is no implementation for maximum likelihood estimation of these likelihood functions in general (heteroskedastic disturbances) cases. This is the reason why less efficient IV-based methods, 'robust 2-SLS' estimation for example, must be applied when disturbance terms may be heteroskedastic. In this paper, we develop a new computer program for maximum likelihood estimation and confirm the efficiency of our estimator in heteroskedastic disturbance cases using Monte Carlo simulations.

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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa10/ERSA2010finalpaper536.pdf
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    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa10p536.

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    Date of creation: Sep 2011
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    Handle: RePEc:wiw:wiwrsa:ersa10p536
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    1. Won Kim, Chong & Phipps, Tim T. & Anselin, Luc, 2003. "Measuring the benefits of air quality improvement: a spatial hedonic approach," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 24-39, January.
    2. G�ran Therborn & K.C. Ho, 2009. "Introduction," City, Taylor & Francis Journals, vol. 13(1), pages 53-62, March.
    3. Amemiya, Takeshi, 1977. "A note on a heteroscedastic model," Journal of Econometrics, Elsevier, vol. 6(3), pages 365-370, November.
    4. Kelejian, Harry H. & Robinson, Dennis P., 1998. "A suggested test for spatial autocorrelation and/or heteroskedasticity and corresponding Monte Carlo results," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 389-417, July.
    5. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
    6. J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar.
    7. Lin, Xu & Lee, Lung-fei, 2010. "GMM estimation of spatial autoregressive models with unknown heteroskedasticity," Journal of Econometrics, Elsevier, vol. 157(1), pages 34-52, July.
    8. Kelejian, Harry H. & Prucha, Ingmar R., 2007. "HAC estimation in a spatial framework," Journal of Econometrics, Elsevier, vol. 140(1), pages 131-154, September.
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