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A SPATIAL DYNAMIC PANEL DATA MODEL WITH BOTH TIME AND INDIVIDUAL FIXED EFFECTS

Published online by Cambridge University Press:  18 August 2009

Lung-fei Lee  and
Jihai Yu
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Abstract

This paper establishes asymptotic properties of quasi-maximum likelihood estimators for spatial dynamic panel data with both time and individual fixed effects when the number of individuals n and the number of time periods T can be large. We propose a data transformation approach to eliminate the time effects. When n / T → 0, the estimators are consistent and asymptotically centered normal; when n is asymptotically proportional to T, they are consistent and asymptotically normal, but the limit distribution is not centered around 0; when n / T → ∞, the estimators are consistent with rate T and have a degenerate limit distribution. We also propose a bias correction for our estimators. When n1/3 / T → 0, the correction will asymptotically eliminate the bias and yield a centered confidence interval. The estimates from the transformation approach can be consistent when n is a fixed finite number.

Type
Research Article
Information
Econometric Theory , Volume 26 , Issue 2 , April 2010 , pp. 564 - 597
Copyright
Copyright © Cambridge University Press 2009

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Footnotes

We thank two anonymous referees and the co-editor Jinyong Hahn for their comments and suggestions for improving this paper. Lee acknowledges financial support from NSF under grant SES-0519204.

References

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