Shin, Yongcheol, Chen, Jia orcid.org/0000-0002-2791-2486 and Zheng, Chaowen (2022) Estimation and Inference in Heterogeneous Spatial Panels with a Multifactor Error Structure. Journal of Econometrics. pp. 55-79. ISSN 0304-4076
Abstract
We develop a unifying econometric framework for the analysis of heterogeneous panel data models that can account for both spatial dependence and common factors. To tackle the challenging issues of endogeneity due to the spatial lagged term and the correlation between the regressors and factors, we propose the CCEX-IV estimation procedure that approximates factors by the cross-section averages of regressors and deals with the spatial endogeneity using the internal instrumental variables. We develop the individual and Mean Group estimators, and establish their consistency and asymptotic normality. By contrast, the Pooled estimator is shown to be inconsistent in the presence of parameter heterogeneity. Monte Carlo simulations confirm that the finite sample performance of the proposed estimators is quite satisfactory. We demonstrate the usefulness of our approach with an application to the house price growth for Local Authority Districts in the UK over 1997Q1-2016Q4.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2021 Published by Elsevier B.V. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. |
Keywords: | Spatial Dependence and Heterogeneity, Unobserved Common Factors, CCEX-IV Estimation, the UK House Price Growth, GCM Analysis. |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Funding Information: | Funder Grant number ECONOMIC AND SOCIAL RESEARCH COUNCIL (ESRC) ES/T01573X/1 |
Depositing User: | Pure (York) |
Date Deposited: | 12 May 2021 15:00 |
Last Modified: | 01 Nov 2024 01:23 |
Published Version: | https://doi.org/10.1016/j.jeconom.2021.05.003 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1016/j.jeconom.2021.05.003 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:174055 |