Robust dynamic space–time panel data models using $$\varepsilon $$ ε -contamination: an application to crop yields and climate change

Badi Baltagi, Georges Bresson, Anoop Chaturvedi () and Guy Lacroix

Empirical Economics, 2023, vol. 64, issue 6, No 2, 2475-2509

Abstract: Abstract This paper extends the Baltagi et al. (J Econom 202:108–123, 2018; Advances in econometrics, essays in honor of M. Hashem Pesaran, Emerald Publishing, Bingley, 2021) static and dynamic $$\varepsilon $$ ε -contamination papers to dynamic space–time models. We investigate the robustness of Bayesian panel data models to possible misspecification of the prior distribution. The proposed robust Bayesian approach departs from the standard Bayesian framework in two ways. First, we consider the $$\varepsilon $$ ε -contamination class of prior distributions for the model parameters as well as for the individual effects. Second, both the base elicited priors and the $$\varepsilon $$ ε -contamination priors use Zellner (Bayesian inference and decision techniques: essays in honor of Bruno de Finetti. Studies in Bayesian econometrics, vol 6, North-Holland, Amsterdam, pp 389–399, 1986)’s g-priors for the variance–covariance matrices. We propose a general “toolbox” for a wide range of specifications which includes the dynamic space–time panel model with random effects, with cross-correlated effects à la Chamberlain, for the Hausman–Taylor world and for dynamic panel data models with homogeneous/heterogeneous slopes and cross-sectional dependence. Using an extensive Monte Carlo simulation study, we compare the finite sample properties of our proposed estimator to those of standard classical estimators. We illustrate our robust Bayesian estimator using the same data as in Keane and Neal (Quant Econ 11:1391–1429, 2020). We obtain short-run as well as long-run effects of climate change on corn producers in the USA.

Keywords: Climate change; Crop yields; Dynamic model; $$\varepsilon $$ ε -Contamination; Panel data; Robust Bayesian estimator; Space–time (search for similar items in EconPapers)
JEL-codes: C11 C23 C26 Q15 Q54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00181-022-02348-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:empeco:v:64:y:2023:i:6:d:10.1007_s00181-022-02348-9

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-022-02348-9

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().