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A threshold extension of spatial dynamic panel model with fixed effects

Junyue Wu () and Yasumasa Matsuda ()
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Junyue Wu: Tohoku University
Yasumasa Matsuda: Tohoku University

Journal of Spatial Econometrics, 2021, vol. 2, issue 1, 1-30

Abstract: Abstract This paper proposes a threshold extension of the spatial dynamic panel data (SDPD) model with fixed effects. We introduce a threshold variable to account for regional dependencies of parameters in SDPD models. Moreover, we applied an extension of Yang (J Econom 205(2):423–447, 2018) proposed unified M-estimation to estimate the parameters in the threshold SDPD models, where the consistency and asymptotic normality are established theoretically when the number of cross-sectional units tends to be infinite. The M-estimation is compared with the conditional quasi-maximum likelihood estimation by Monte Carlo experiments, showing that the M-estimation yields an estimation of less bias in cases of short time panels with robust standard errors under non-normality. We illustrate an empirical application of the threshold SDPD model to the U.S. state-level GDP and power usage growth data from 1998 to 2018, detecting the non-trivial regional dependencies of SDPD model parameters.

Keywords: Spatial dynamic panel data model; Short panel data; M-estimation; Fixed effect; Threshold extension (search for similar items in EconPapers)
JEL-codes: C51 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s43071-021-00008-1

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