Prediction Using Panel Data Regression with Spatial Random Effects

Bernard Fingleton ()

SERC Discussion Papers from Spatial Economics Research Centre, LSE

Abstract: This paper considers some of the issues and difficulties relating to the use of spatial paneldata regression in prediction, illustrated by the effects of mass immigration on wages andincome levels in local authority areas of Great Britain. Motivated by contemporary urbaneconomics theory, and using recent advances in spatial econometrics, the panel regression haswages dependent on employment density and the efficiency of the labour force. There aretwo types of spatial interaction, a spatial lag of wages, and an autoregressive process for errorcomponents. The estimates suggest that increased employment densities will increase wagelevels, but wages may fall if migrants are under-qualified. This uncertainty highlights the factthat ex ante forecasting should be used with great caution as a basis for policy decisions.

Keywords: panel data; spatially correlated error components; economic geography; spatialeconometrics (search for similar items in EconPapers)
JEL-codes: C33 O10 F02 (search for similar items in EconPapers)
Date: 2008-09
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.spatialeconomics.ac.uk/textonly/SERC/pu ... nload/sercdp0007.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cep:sercdp:0007

Access Statistics for this paper

More papers in SERC Discussion Papers from Spatial Economics Research Centre, LSE
Series data maintained by ().