Dynamic Spatial Panel Models: Networks, Common Shocks, and Sequential Exogeneity

Guido Kuersteiner and Ingmar Prucha

Econometrica, 2020, vol. 88, issue 5, 2109-2146

Abstract: This paper considers a class of generalized methods of moments (GMM) estimators for general dynamic panel models, allowing for weakly exogenous covariates and cross‐sectional dependence due to spatial lags, unspecified common shocks, and time‐varying interactive effects. We significantly expand the scope of the existing literature by allowing for endogenous time‐varying spatial weight matrices without imposing explicit structural assumptions on how the weights are formed. An important area of application is in social interaction and network models where our specification can accommodate data dependent network formation. We consider an exemplary social interaction model and show how identification of the interaction parameters is achieved through a combination of linear and quadratic moment conditions. For the general setup we develop an orthogonal forward differencing transformation to aid in the estimation of factor components while maintaining orthogonality of moment conditions. This is an important ingredient to a tractable asymptotic distribution of our estimators. In general, the asymptotic distribution of our estimators is found to be mixed normal due to random norming. However, the asymptotic distribution of our test statistics is still chi‐square.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://doi.org/10.3982/ECTA13660

Related works:
Working Paper: Dynamic Spatial Panel Models: Networks, Common Shocks, and Sequential Exogeneity (2015)
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:wly:emetrp:v:88:y:2020:i:5:p:2109-2146

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido W. Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().