Description/Abstract
This paper proposes a generalized panel data model with random effects and first-order spatially auto correlated residuals that encompasses two previously suggested specifications. The first one is described in Anselin's (1988) book and the second one by Kapoor, Kelejian, and Prucha (2007). Our encompassing specification allows us to test for these models as restricted specifications. In particular, we derive three LM and LR tests that restrict out generalized model to obtain (i) the Anselin model, (ii) the Kapoor, Kelejian, and Prucha model, and (iii) the simple random effects model that ignores the spatial correlation in the residuals. For two of these three tests, we obtain closed form solutions and we derive their large sample distributions. Our Monte Carlo results show that the suggested tests are powerful in testing for these restricted specifications even in small and medium sized samples.
Document Type
Working Paper
Date
2009
Keywords
Panel data, spatially auto correlated residuals, maximum-likelihood estimation, Lagrange multiplier, likelihood ratio
Language
English
Series
Working Papers Series
Disciplines
Economics
Recommended Citation
Baltagi, Badi H.; Egger, Peter; and Pfaffermayr, Michael, "A Generalized Spatial Panel Data Model with Random Effects" (2009). Center for Policy Research. 53.
https://surface.syr.edu/cpr/53
Source
Metadata from RePEc
Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.
Additional Information
Working paper no. 113
Harvest from RePEc at http://repec.org