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Unified M-Estimation of Fixed-Effects Spatial Dynamic Models with Short Panels

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  • Yang Zhenlin

    (Singapore Management University)

Abstract

It is well known that quasi maximum likelihood (QML) estimation of dynamic panel data (DPD) models with short panels depends on the assumptions on the initial values, and a wrong treatment of them will result in inconsistency and serious bias. The same issues apply to spatial DPD (SDPD) models with short panels. In this paper, a unifiedMestimation method is proposed for estimating the fixed-effects SDPD models containing three major types of spatial effects, namely spatial lag, spatial error and space-time lag. The method is free from the specification of the distribution of the initial observations and robust against nonnormality of the errors. Consistency and asymptotic normality of the proposed M-estimator are established. A martingale difference representation of the underlying estimating functions is developed, which leads to an initial-condition free estimate of the variance of the M-estimators. Monte Carlo results show that the proposed methods have excellent finite sample performance.

Suggested Citation

  • Yang Zhenlin, 2015. "Unified M-Estimation of Fixed-Effects Spatial Dynamic Models with Short Panels," Working Papers 14-2015, Singapore Management University, School of Economics.
    • Handle: RePEc:siu:wpaper:14-2015
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    File URL: http://ink.library.smu.edu.sg/soe_research/1783/
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    Cited by:

    1. Taşpınar, Süleyman & Doğan, Osman & Bera, Anil K., 2017. "GMM gradient tests for spatial dynamic panel data models," Regional Science and Urban Economics, Elsevier, vol. 65(C), pages 65-88.
    2. Taspinar, Suleyman & Dogan, Osman & Bera, Anil K., 2017. "GMM Gradient Tests for Spatial Dynamic Panel Data Models," MPRA Paper 82830, University Library of Munich, Germany.

    More about this item

    Keywords

    Adjusted quasi score; Dynamic panels; Fixed effects; Initial-condition free estimation; Martingale difference; Spatial effects; Short panels.;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: 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
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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