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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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    4. Luis Alfonso Dau & Elizabeth M Moore & William Newburry, 2020. "The grass is always greener: The impact of home and host country CSR reputation signaling on cross-country investments," Journal of International Business Policy, Palgrave Macmillan, vol. 3(2), pages 154-182, June.
    5. Glass, Anthony J. & Kenjegalieva, Karligash & Sickles, Robin C. & Weyman-Jones, Thomas, 2018. "The Spatial Efficiency Multiplier and Common Correlated Effects in a Spatial Autoregressive Stochastic Frontier Model," Working Papers 18-003, Rice University, Department of Economics.
    6. Duan, Kun & Mishra, Tapas & Parhi, Mamata, 2018. "Space matters: Understanding the real effects of macroeconomic variations in cross-country housing price movements," Economics Letters, Elsevier, vol. 163(C), pages 130-135.
    7. Kun Duan & Tapas Mishra & Mamata Parhi & Simon Wolfe, 2019. "How Effective are Policy Interventions in a Spatially-Embedded International Real Estate Market?," The Journal of Real Estate Finance and Economics, Springer, vol. 58(4), pages 596-637, May.
    8. Ren, Yimeng & Li, Zhe & Zhu, Xuening & Gao, Yuan & Wang, Hansheng, 2024. "Distributed estimation and inference for spatial autoregression model with large scale networks," Journal of Econometrics, Elsevier, vol. 238(2).
    9. Allah Morad Seif & Hossein Panahi & Davoud Hamidi Razi, 2017. "Regional Economic Growth and Spatial Spillover Effects in MENA Area," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(4), pages 765-787, Autumn.
    10. Carmelo Algeri & Antonio F. Forgione & Carlo Migliardo, 2022. "Do spatial dependence and market power matter in the diversification of cooperative banks?," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(3), November.
    11. 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.
    12. Elizabeth M. Moore & Kristin Brandl & Luis Alfonso Dau, 2024. "Intergovernmental organizations and entrepreneurship: understanding the relationship between the supranational, national, and individual level," Journal of International Business Policy, Palgrave Macmillan, vol. 7(4), pages 440-458, December.
    13. 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.
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    More about this item

    Keywords

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