The Mundlak Approach in the Spatial Durbin Panel Data Model

Nicolas Debarsy ()
Additional contact information
Nicolas Debarsy: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique

Post-Print from HAL

Abstract: This paper extends the Mundlak approach to the spatial Durbin panel data model (SDM) to help the applied researcher to determine the adequacy of the random effects specification in this setup. We propose a likelihood ratio (LR) test that assesses the significance of the correlation between regressors and individual effects. By contrast to the Hausman test, the Mundlak approach identifies (to some extend) the regressors correlated with individual effects. The second advantage is that once the correlation with individual effects has been modeled through an auxiliary regression, the random effects specification provides consistent estimators and the effect of time-constant variables can be estimated. Some Monte Carlo simulations study the properties of this proposed LR test in small samples and show that in some cases, it has a better behavior than the Hausman test. We finally illustrate the usefulness of the extended Mundlak approach by estimating a house price model where some of the price determinants are timeconstant. We show that ignoring the endogeneity of regressors with respect to individual effects leads to unreliable estimated parameters while results obtained using the Mundlak approach and the fixed effects specification are similar (concerning time-varying variables), implying that correlation between regressors and individual effects is well captured.

Keywords: Spatial autocorrelation; Panel data model; Random effects; Mundlak approach; House price model JEL: C12 C21 C23 C52; House price model JEL: C12; C21; C23; C52; Spatial autocorrelation; Panel data model; Random effects; Mundlak approach; House price model JEL: C12 C21 C23 C52; Spatial autocorrelation; Panel data model; Random effects; Mundlak approach; House price model JEL: C12 (search for similar items in EconPapers)
Date: 2012-03
Note: View the original document on HAL open archive server: https://hal.science/hal-04989094v1
References: Add references at CitEc
Citations:

Published in Spatial Economic Analysis, 2012, 7 (1), pp.109-131. ⟨10.1080/17421772.2011.647059⟩

Downloads: (external link)
https://hal.science/hal-04989094v1/document (application/pdf)

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:hal:journl:hal-04989094

DOI: 10.1080/17421772.2011.647059

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().