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Estimation of Spatial Regression Models with Autoregressive Errors by Two Stage Least Squares Procedures: A Serious Problem

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Abstract

Various two stage least squares procedures have been suggested for the estimation of the autoregressive parameter in the spatial autoregressive model of order one. These procedures are computationally convenient and so their use is "tempting". In this paper we show that these procedures are, in general, not consistent and therefore should not be used.

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  • Harry H. Kelejian & Ingmar R. Prucha, 1997. "Estimation of Spatial Regression Models with Autoregressive Errors by Two Stage Least Squares Procedures: A Serious Problem," Electronic Working Papers 97-001, University of Maryland, Department of Economics.
    • Handle: RePEc:umd:umdeco:97-001
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    1. Dubin, Robin A, 1988. "Estimation of Regression Coefficients in the Presence of Spatially Autocorrelated Error Terms," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 466-474, August.
    2. Herman J. Bierens & A. R. Gallant (ed.), 1997. "Nonlinear Models," Books, Edward Elgar Publishing, volume 0, number 878.
    3. Blommestein, Hans J., 1983. "Specification and estimation of spatial econometric models : A discussion of alternative strategies for spatial economic modelling," Regional Science and Urban Economics, Elsevier, vol. 13(2), pages 251-270, May.
    4. Benedikt M. Pötscher & Ingmar R. Prucha, 1999. "Basic Elements of Asymptotic Theory," Electronic Working Papers 99-001, University of Maryland, Department of Economics.
    5. Anselin, Luc, 1990. "Some robust approaches to testing and estimation in spatial econometrics," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 141-163, September.
    6. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-965, July.
    7. P Burridge, 1981. "Testing for a Common Factor in a Spatial Autoregression Model," Environment and Planning A, , vol. 13(7), pages 795-800, July.
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    More about this item

    Keywords

    Spatial Models; Autocorrelation; Two Stage Least Squares;
    All these keywords.

    JEL classification:

    • 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

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