Structural interactions in spatial panels

TY - JOUR

T1 - Structural interactions in spatial panels

AU - Bhattacharjee, Arnab

AU - Holly, Sean

N1 - Copyright 2011 Elsevier B.V., All rights reserved.

PY - 2011/2/1

Y1 - 2011/2/1

N2 - Until recently, considerable effort has been devoted to the estimation of panel data regression models without adequate attention being paid to the drivers of interaction amongst cross-section and spatial units. We discuss some new methodologies in this emerging area and demonstrate their use in measurement and inferences on cross-section and spatial interactions. Specifically, we highlight the important distinction between spatial dependence driven by unobserved common factors and those based on a spatial weights matrix. We argue that purely factor-driven models of spatial dependence may be inadequate because of their connection with the exchangeability assumption. The three methods considered are appropriate for different asymptotic settings; estimation under structural constraints when N is fixed and T ? 8, whilst the methods based on GMM and common correlated effects are appropriate when T » N ? 8. Limitations and potential enhancements of the existing methods are discussed, and several directions for new research are highlighted.

AB - Until recently, considerable effort has been devoted to the estimation of panel data regression models without adequate attention being paid to the drivers of interaction amongst cross-section and spatial units. We discuss some new methodologies in this emerging area and demonstrate their use in measurement and inferences on cross-section and spatial interactions. Specifically, we highlight the important distinction between spatial dependence driven by unobserved common factors and those based on a spatial weights matrix. We argue that purely factor-driven models of spatial dependence may be inadequate because of their connection with the exchangeability assumption. The three methods considered are appropriate for different asymptotic settings; estimation under structural constraints when N is fixed and T ? 8, whilst the methods based on GMM and common correlated effects are appropriate when T » N ? 8. Limitations and potential enhancements of the existing methods are discussed, and several directions for new research are highlighted.

UR - https://www.scopus.com/pages/publications/79551682058

U2 - 10.1007/s00181-010-0396-1

DO - 10.1007/s00181-010-0396-1

M3 - Article

AN - SCOPUS:79551682058

SN - 0377-7332

VL - 40

SP - 69

EP - 94

JO - Empirical Economics

JF - Empirical Economics

IS - 1

ER -