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A threshold extension of spatial dynamic panel model

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  • Junyue Wua
  • Yasumasa Matsuda

Abstract

This paper proposes a threshold extension of Spatial Dynamic Panel Data (SDPD) model with fixed two-way effect to analyze data sets with spatial-temporal heterogeneity. We classify multiple regimes by a threshold variable to examine the regional dependency of parameters in SDPD models. A Bayesian estimation method along with a maximum likelihood one is put forward and compared by their Monte Carlo performance results. We find out that our Bayesian method yields more preferable estimation results, though at the expense of computation time. We also illustrate empirical applications of the threshold SDPD model to two spatial panel data set, US cigar demand data from 1963 to 1992 and Japan foreign labour data from 2008 to 2014, showing that meaningful regional dependencies of SDPD model parameters were detected.

Suggested Citation

  • Junyue Wua & Yasumasa Matsuda, 2019. "A threshold extension of spatial dynamic panel model," DSSR Discussion Papers 98, Graduate School of Economics and Management, Tohoku University.
    • Handle: RePEc:toh:dssraa:98
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    File URL: http://hdl.handle.net/10097/00125675
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