Econometric Theory

Table of Contents - 2010 - Volume 26, Issue 02  

Cambridge Journals Online - CUP Full-Text Page
Econometric Theory (2010), 26:564-597 Cambridge University Press
Copyright © Cambridge University Press 2009
doi:10.1017/S0266466609100099

ARTICLES

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

Lung-fei Leea1 c1 and Jihai Yua2

a1 Ohio State University
a2 University of Kentucky
Article author query
lee lf [Google Scholar]
yu j [Google Scholar]

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 $\root \of {nT}$ consistent and asymptotically centered normal; when n is asymptotically proportional to T, they are $\root \of {nT}$ 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.

Correspondence:

c1 Address correspondence to Lung-fei Lee, Department of Economics, Ohio State University, Columbus, OH 43210, USA; e-mail: lflee@econ.ohio-state.edu.

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.