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An
Alternative Estimator for Fixed Effects Spatial Models
URAG Working Paper #03-03
An Alternative Estimator for Fixed Effects Spatial Models (pdf)
by Mary G. McGarvey and Mary Beth Walker, August 2003
Keywords: spatial correlation; fixed effect model; spatial correlation
consistent covariance estimation; monte carlo evidence
This paper examines inference in finite samples based on estimation using maximum likelihood and ordinary least-squares estimators in fixed effect models with spatially autocorrelated errors. The focus of the Monte Carlo experiments is on the effect of covariance misspecification on finite sample inference. We find that the maximum likelihood estimator of the conditional mean parameters is more efficient than OLS under most populations but the quasi-t statistics are most reliable using OLS with a spatial correlation consistent covariance estimator.
Comments and questions regarding this paper may be directed to Mary Beth Walker.