Description/Abstract
This paper focuses on inference based on the usual panel data estimators of a one-way error component regression model when the true specification is a spatial error component model. Among the estimators considered, are pooled OLS, random and fixed effects, maximum likelihood under normality, etc. The spatial effects capture the cross-section dependence, and the usual panel data estimators ignore this dependence. Two popular forms of spatial autocorrelation are considered, namely, spatial auto-regressive random effects (SAR-RE) and spatial moving average random effects (SMA-RE). We show that when the spatial coefficients are large, test of hypothesis based on the usual panel data estimators that ignore spatial dependence can lead to misleading inference.
Document Type
Working Paper
Date
3-2010
Keywords
Panel data; Hausman test; Random effect; spatial autocorrelation; Maximum Likelihood
Series
Working Papers Series
Disciplines
Economics
Recommended Citation
Baltagi, Badi H. and Pirotte, Alain, "Panel Data Inference under Spatial Dependence" (2010). Center for Policy Research. 168.
https://surface.syr.edu/cpr/168
Source
local input
Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.
