The Spatial Random Effects and the Spatial Fixed Effects Model. The Hausman Test in a Cliff and Ord Panel Model

Jan Mutl and Michael Pfaffermayr

No 229, Economics Series from Institute for Advanced Studies

Abstract: This paper studies the spatial random effects and spatial fixed effects model. The model includes a Cliff and Ord type spatial lag of the dependent variable as well as a spatially lagged one-way error component structure, accounting for both heterogeneity and spatial correlation across units. We discuss instrumental variable estimation under both the fixed and the random effects specification and propose a spatial Hausman test which compares these two models accounting for spatial autocorrelation in the disturbances. We derive the large sample properties of our estimation procedures and show that the test statistic is asymptotically chi-square distributed. A small Monte Carlo study demonstrates that this test works well even in small panels.

Keywords: Spatial econometrics; Panel data; Random effects estimator; Within estimator; Hausman test (search for similar items in EconPapers)
JEL-codes: C21 C23 (search for similar items in EconPapers)
Pages: 34 pages, Appendix
Date: 2008-10
New Economics Papers: this item is included in nep-ecm, nep-geo and nep-ure
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Citations: View citations in EconPapers (9)

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https://irihs.ihs.ac.at/id/eprint/1869 First version, 2008 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ihs:ihsesp:229

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