Cross-sectional dependence model specifications in a static trade panel data setting

James P. LeSage, Manfred M. Fischer

Publikation: Wissenschaftliche FachzeitschriftOriginalbeitrag in FachzeitschriftBegutachtung


The focus is on cross-sectional dependence in panel trade flow models. We propose alternative specifications for modeling time-invariant factors such as sociocultural indicator variables, e.g., common language and currency. These are typically treated as a source of heterogeneity that is eliminated using fixed effects transformations, but we find evidence of cross-sectional dependence after eliminating country-specific and time-specific effects. These findings suggest use of alternative simultaneous dependence model specifications that accommodate cross-sectional dependence, which we set forth along with Bayesian estimation methods. Ignoring cross-sectional dependence implies biased estimates from panel trade flow models that rely on fixed effects.
Seiten (von - bis)5 - 46
FachzeitschriftJournal of Geographical Systems
PublikationsstatusVeröffentlicht - 2020

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