Publication Type

Journal Article

Version

publishedVersion

Publication Date

8-2018

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 unified Mestimation 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.

Keywords

Adjusted quasi score, Dynamic panels, Fixed effects, Initial-condition free estimation, Martingale difference, Spatial effects, Short panels

Discipline

Econometrics

Research Areas

Econometrics

Publication

Journal of Econometrics

Volume

205

Issue

2

First Page

423

Last Page

447

ISSN

0304-4076

Identifier

10.1016/j.jeconom.2017.08.019

Publisher

Elsevier: 24 months

Copyright Owner and License

Author

Additional URL

https://doi.org/10.1016/j.jeconom.2017.08.019

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