Next Article in Journal
Ten Things You Should Know about the Dynamic Conditional Correlation Representation
Previous Article in Journal
Outlier Detection in Regression Using an Iterated One-Step Approximation to the Huber-Skip Estimator
Econometrics 2013, 1(1), 71-114; doi:10.3390/econometrics1010071
Article

Generalized Spatial Two Stage Least Squares Estimation of Spatial Autoregressive Models with Autoregressive Disturbances in the Presence of Endogenous Regressors and Many Instruments

1
 and 2,*
Received: 25 March 2013; in revised form: 25 April 2013 / Accepted: 25 April 2013 / Published: 27 May 2013
Download PDF [429 KB, uploaded 27 May 2013]
Abstract: This paper studies the generalized spatial two stage least squares (GS2SLS) estimation of spatial autoregressive models with autoregressive disturbances when there are endogenous regressors with many valid instruments. Using many instruments may improve the efficiency of estimators asymptotically, but the bias might be large in finite samples, making the inference inaccurate. We consider the case that the number of instruments K increases with, but at a rate slower than, the sample size, and derive the approximate mean square errors (MSE) that account for the trade-offs between the bias and variance, for both the GS2SLS estimator and a bias-corrected GS2SLS estimator. A criterion function for the optimal K selection can be based on the approximate MSEs. Monte Carlo experiments are provided to show the performance of our procedure of choosing K.
Keywords: spatial autoregressive; spatial error; 2SLS; endogenous regressor; instrumental variable selection spatial autoregressive; spatial error; 2SLS; endogenous regressor; instrumental variable selection
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Export to BibTeX |
EndNote


MDPI and ACS Style

Jin, F.; Lee, L.-F. Generalized Spatial Two Stage Least Squares Estimation of Spatial Autoregressive Models with Autoregressive Disturbances in the Presence of Endogenous Regressors and Many Instruments. Econometrics 2013, 1, 71-114.

AMA Style

Jin F, Lee L-F. Generalized Spatial Two Stage Least Squares Estimation of Spatial Autoregressive Models with Autoregressive Disturbances in the Presence of Endogenous Regressors and Many Instruments. Econometrics. 2013; 1(1):71-114.

Chicago/Turabian Style

Jin, Fei; Lee, Lung-fei. 2013. "Generalized Spatial Two Stage Least Squares Estimation of Spatial Autoregressive Models with Autoregressive Disturbances in the Presence of Endogenous Regressors and Many Instruments." Econometrics 1, no. 1: 71-114.


Econometrics EISSN 2225-1146 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert