Publication Type

Working Paper

Version

publishedVersion

Publication Date

8-2018

Abstract

In this paper, M-estimation and inference methods are developed for spatial dynamic panel data models with correlated random effects, based on short panels. The unobserved individual-specific effects are assumed to be correlated with the observed time-varying regressors linearly or in a linearizable way, giving the so-called correlated random effects model, which allows the estimation of effects of time-invariant regressors. The unbiased estimating functions are obtained by adjusting the conditional quasi-scores given the initial observations, leading to M-estimators that are consistent, asymptotically normal, and free from the initial conditions except the process starting time. By decomposing the estimating functions into sums of terms uncorrelated given idiosyncratic errors, a hybrid method is developed for consistently estimating the variance-covariance matrix of the M-estimators, which again depends only on the process starting time. Monte Carlo results demonstrate that the proposed methods perform well in finite sample.

Keywords

Adjusted quasi score, Dynamic panels, Correlated random effects, Initial-conditions, Martingale difference, Spatial effects, Short panels

Discipline

Econometrics

Research Areas

Econometrics

First Page

1

Last Page

46

Publisher

SMU Economics and Statistics Working Paper Series, No. 15-2018

City or Country

Singapore

Copyright Owner and License

Authors

Comments

Published in Journal of Econometrics (2021) DOI: 10.1016/j.jeconom.2020.05.016

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