SPATIAL PANELS: RANDOM COMPONENTS VERSUS FIXED EFFECTS

Lung-Fei Lee and Jihai Yu ()

International Economic Review, 2012, vol. 53, issue 4, 1369-1412

Abstract: This article investigates spatial panel data models with a space–time filter in disturbances. We consider their estimation by both fixed effects and random effects specifications. With a between equation properly defined, the difference of the random versus fixed effects models can be highlighted. We show that the random effects estimate is a pooling of the within and between estimates. A Hausman‐type specification test and an Lagrangian multiplier test are proposed for the testing of the random components specification versus the fixed effects specification.

Date: 2012
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https://doi.org/10.1111/j.1468-2354.2012.00724.x

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