GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003)

P. Cizek, J.P.A.M. Jacobs, J.E. Ligthart, H. Vrijburg

Research output: Working paperDiscussion paperOther research output

3887 Downloads (Pure)

Abstract

We extend the three-step generalized methods of moments (GMM) approach of Kapoor et al. (2007), which corrects for spatially correlated errors in static panel data models, by introducing a spatial lag and a one-period lag of the dependent variable as additional explanatory variables. Combining the extended Kapoor et al. (2007) approach with the dynamic panel data model GMM estimators of Arellano and Bond (1991) and Blundell and Bond (1998) and specifying moment conditions for various time lags, spatial lags, and sets of exogenous variables yields new spatial dynamic panel data estimators. We prove their consistency and asymptotic normality for a large number of spatial units N and a xed small number of time periods T. Monte Carlo simulations demonstrate that the root mean squared error of spatially corrected GMM estimates|which are based on a spatial lag and spatial error correction|is generally smaller than that of corresponding spatial GMM estimates in which spatial error correlation is ignored. We show that the spatial Blundell-Bond estimators outperform the spatial Arellano-Bond estimators.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages42
Volume2011-134
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-134

Fingerprint

panel data
error correction
effect
method
simulation

Keywords

  • Dynamic panel models
  • spatial lag
  • spatial error
  • GMM estimation

Cite this

Cizek, P., Jacobs, J. P. A. M., Ligthart, J. E., & Vrijburg, H. (2011). GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003). (CentER Discussion Paper; Vol. 2011-134). Tilburg: Econometrics.
Cizek, P. ; Jacobs, J.P.A.M. ; Ligthart, J.E. ; Vrijburg, H. / GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003). Tilburg : Econometrics, 2011. (CentER Discussion Paper).
@techreport{b80cf367c4354f208e4c83571039771c,
title = "GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003)",
abstract = "We extend the three-step generalized methods of moments (GMM) approach of Kapoor et al. (2007), which corrects for spatially correlated errors in static panel data models, by introducing a spatial lag and a one-period lag of the dependent variable as additional explanatory variables. Combining the extended Kapoor et al. (2007) approach with the dynamic panel data model GMM estimators of Arellano and Bond (1991) and Blundell and Bond (1998) and specifying moment conditions for various time lags, spatial lags, and sets of exogenous variables yields new spatial dynamic panel data estimators. We prove their consistency and asymptotic normality for a large number of spatial units N and a xed small number of time periods T. Monte Carlo simulations demonstrate that the root mean squared error of spatially corrected GMM estimates|which are based on a spatial lag and spatial error correction|is generally smaller than that of corresponding spatial GMM estimates in which spatial error correlation is ignored. We show that the spatial Blundell-Bond estimators outperform the spatial Arellano-Bond estimators.",
keywords = "Dynamic panel models, spatial lag, spatial error, GMM estimation",
author = "P. Cizek and J.P.A.M. Jacobs and J.E. Ligthart and H. Vrijburg",
note = "Pagination: 42",
year = "2011",
language = "English",
volume = "2011-134",
series = "CentER Discussion Paper",
publisher = "Econometrics",
type = "WorkingPaper",
institution = "Econometrics",

}

Cizek, P, Jacobs, JPAM, Ligthart, JE & Vrijburg, H 2011 'GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003)' CentER Discussion Paper, vol. 2011-134, Econometrics, Tilburg.

GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003). / Cizek, P.; Jacobs, J.P.A.M.; Ligthart, J.E.; Vrijburg, H.

Tilburg : Econometrics, 2011. (CentER Discussion Paper; Vol. 2011-134).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003)

AU - Cizek, P.

AU - Jacobs, J.P.A.M.

AU - Ligthart, J.E.

AU - Vrijburg, H.

N1 - Pagination: 42

PY - 2011

Y1 - 2011

N2 - We extend the three-step generalized methods of moments (GMM) approach of Kapoor et al. (2007), which corrects for spatially correlated errors in static panel data models, by introducing a spatial lag and a one-period lag of the dependent variable as additional explanatory variables. Combining the extended Kapoor et al. (2007) approach with the dynamic panel data model GMM estimators of Arellano and Bond (1991) and Blundell and Bond (1998) and specifying moment conditions for various time lags, spatial lags, and sets of exogenous variables yields new spatial dynamic panel data estimators. We prove their consistency and asymptotic normality for a large number of spatial units N and a xed small number of time periods T. Monte Carlo simulations demonstrate that the root mean squared error of spatially corrected GMM estimates|which are based on a spatial lag and spatial error correction|is generally smaller than that of corresponding spatial GMM estimates in which spatial error correlation is ignored. We show that the spatial Blundell-Bond estimators outperform the spatial Arellano-Bond estimators.

AB - We extend the three-step generalized methods of moments (GMM) approach of Kapoor et al. (2007), which corrects for spatially correlated errors in static panel data models, by introducing a spatial lag and a one-period lag of the dependent variable as additional explanatory variables. Combining the extended Kapoor et al. (2007) approach with the dynamic panel data model GMM estimators of Arellano and Bond (1991) and Blundell and Bond (1998) and specifying moment conditions for various time lags, spatial lags, and sets of exogenous variables yields new spatial dynamic panel data estimators. We prove their consistency and asymptotic normality for a large number of spatial units N and a xed small number of time periods T. Monte Carlo simulations demonstrate that the root mean squared error of spatially corrected GMM estimates|which are based on a spatial lag and spatial error correction|is generally smaller than that of corresponding spatial GMM estimates in which spatial error correlation is ignored. We show that the spatial Blundell-Bond estimators outperform the spatial Arellano-Bond estimators.

KW - Dynamic panel models

KW - spatial lag

KW - spatial error

KW - GMM estimation

M3 - Discussion paper

VL - 2011-134

T3 - CentER Discussion Paper

BT - GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003)

PB - Econometrics

CY - Tilburg

ER -

Cizek P, Jacobs JPAM, Ligthart JE, Vrijburg H. GMM Estimation of Fixed Effects Dynamic Panel Data Models with Spatial Lag and Spatial Errors (Replaced by CentER DP 2015-003). Tilburg: Econometrics. 2011. (CentER Discussion Paper).