Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/113776 
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper No. 5445
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper considers a class of GMM estimators for general dynamic panel models, allowing for cross sectional dependence due to spatial lags and due to unspecified common shocks. We significantly expand the scope of the existing literature by allowing for endogenous spatial weight matrices, time-varying interactive effects, as well as weakly exogenous covariates. The model is expected to be useful for empirical work in both macro and microeconomics. An important area of application is in social interaction and network models where our specification can accommodate data dependent network formation. We discuss explicit examples from the recent social interaction literature. Identification of spatial interaction parameters is achieved through a combination of linear and quadratic moment conditions. 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 the social interactions example, orthogonal forward differencing amounts to controlling for unobserved correlated effects by combining multiple outcome measures.
JEL: 
C01
C21
C23
C31
C33
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.