EconPapers    
Economics at your fingertips  
 

Two-Step Lasso Estimation of the Spatial Weights Matrix

Achim Ahrens and Arnab Bhattacharjee ()

Econometrics, 2015, vol. 3, issue 1, 1-28

Abstract: The vast majority of spatial econometric research relies on the assumption that the spatial network structure is known a priori. This study considers a two-step estimation strategy for estimating the n(n-1) interaction effects in a spatial autoregressive panel model where the spatial dimension is potentially large. The identifying assumption is approximate sparsity of the spatial weights matrix. The proposed estimation methodology exploits the Lasso estimator and mimics two-stage least squares (2SLS) to account for endogeneity of the spatial lag. The developed two-step estimator is of more general interest. It may be used in applications where the number of endogenous regressors and the number of instrumental variables is larger than the number of observations. We derive convergence rates for the two-step Lasso estimator. Our Monte Carlo simulation results show that the two-step estimator is consistent and successfully recovers the spatial network structure for reasonable sample size, T .

Keywords: lasso; endogeneity; unkown W; spatial weights matrix (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
https://www.mdpi.com/2225-1146/3/1/128/pdf (application/pdf)
https://www.mdpi.com/2225-1146/3/1/128/ (text/html)

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: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:3:y:2015:i:1:p:128-155:d:46534

Access Statistics for this article

Econometrics is currently edited by Prof. Dr. Kerry Patterson

More articles in Econometrics from MDPI, Open Access Journal
Bibliographic data for series maintained by XML Conversion Team ().

 
Page updated 2020-08-12
Handle: RePEc:gam:jecnmx:v:3:y:2015:i:1:p:128-155:d:46534