Spatial dynamic models with intertemporal optimization: Specification and estimation

Hanbat Jeong and Lung-fei Lee

Journal of Econometrics, 2020, vol. 218, issue 1, 82-104

Abstract: In this paper, we introduce a dynamic spatial interaction econometric model. There are n forward-looking agents of whom each has a parametric linear-quadratic payoff, and they interact with their neighbors through a spatial network. Considering a Markov perfect equilibrium (MPE), we derive a unique Nash equilibrium equation and construct a new spatial dynamic panel data (SDPD) model. For estimation, we suggest mainly the quasi-maximum likelihood (QML) method. Asymptotic properties of the QML estimator are investigated. In a Monte Carlo study, we estimate the model’s parameters and compare the results with those from traditional SDPD models. The model is applied to an empirical study on counties’ public safety spending in North Carolina.

Keywords: Dynamic interaction; Intertemporal optimization; Markov perfect equilibrium; SDPD models; QML estimation; County’s public safety spending (search for similar items in EconPapers)
JEL-codes: C33 C51 C57 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:218:y:2020:i:1:p:82-104

DOI: 10.1016/j.jeconom.2019.10.012

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