Please click here if you are unable to view this page.
TOPIC:
THRESHOLD SPATIAL PANEL DATA MODELS WITH FIXED EFFECTS
ABSTRACT
We introduce general estimation and inference methods for threshold spatial panel data models with two-way fixed effects (2FE) in a diminishing-threshold-effects framework. A valid objective function is first obtained by a simple adjustment on the concentrated quasi loglikelihood with 2FE being concentrated out, which leads to consistent estimation of all common parameters including the threshold parameter. We then show that the estimation of threshold parameter has an asymptotically negligible effect on the asymptotic distribution of the other estimators, and thereby lead to valid inference methods for other common parameters after a bias correction. A likelihood ratio test is proposed for statistical inference on the threshold parameter. We also propose a sup-Wald test for the presence of threshold effects, based on an M-estimation method with the estimating functions being obtained by simply adjusting the concentrated quasi-score functions. Monte Carlo results show that the proposed methods perform well in finite samples. An empirical application is presented on age-of-leader effects on political competitions across Chinese cities.