Abstract
This paper extends the instrumental variable estimators of Kelejian and Prucha (1998) and Lee (2003) proposed for the cross-sectional spatial autoregressive model to the random effects spatial autoregressive panel data model. It also suggests an extension of the Baltagi (1981) error component 2SLS estimator to this spatial panel model.
Highlights
This paper extends the instrumental variable estimators of Kelejian and Prucha (1998) and Lee (2003) proposed for the cross-sectional spatial autoregressive model to the random e¤ects spatial autoregressive panel data model
It suggests an extension of the Baltagi (1981) error component 2SLS estimator to this spatial panel model
The error component structure is given by the second equation with Z = T IN denoting the selector matrix for the (N 1) random vector of individual e¤ects which is assumed to be i.i.d. (0; 2 IN )
Summary
This paper extends the instrumental variable estimators of Kelejian and Prucha (1998) and Lee (2003) proposed for the cross-sectional spatial autoregressive model to the random e¤ects spatial autoregressive panel data model. Instrument Variable Estimation of a Spatial Autoregressive Panel Model with Random E¤ects
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