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Varying-coefficient spatial dynamic panel data models with fixed effects: Theory and application

Author

Listed:
  • Hong, Han
  • Ju, Gaosheng
  • Li, Qi
  • Yan, Karen X.

Abstract

This paper considers a varying-coefficient spatial dynamic panel data model with fixed effects. We show that a two-point approximation method poses a potential weak identification problem. We propose a robust modified estimator to address this issue. Our two-step estimation procedure incorporates both linear and quadratic moment conditions. We also extend our analysis to a partially linear varying-coefficient model and develop a consistent test for this specification. We establish the asymptotic properties of the proposed estimators. Simulations indicate that our estimators and the test statistic perform well in finite samples. We apply the partially linear varying-coefficient model to study how the sales of liquor producers respond to those of neighboring competitors in China. We find spatial dependence among liquor producers and show that the spatial effects vary with competition intensity.

Suggested Citation

  • Hong, Han & Ju, Gaosheng & Li, Qi & Yan, Karen X., 2024. "Varying-coefficient spatial dynamic panel data models with fixed effects: Theory and application," Journal of Econometrics, Elsevier, vol. 245(1).
  • Handle: RePEc:eee:econom:v:245:y:2024:i:1:s0304407624002288
    DOI: 10.1016/j.jeconom.2024.105883
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    More about this item

    Keywords

    Spatial model; Dynamic panel data model; Fixed effects; Varying coefficients;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • 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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