Estimation of semi-parametric varying-coefficient spatial panel data models with random-effects

This paper studies estimation of a semi-parameter varying-coefficient spatial panel data model with random-effects. Under the assumption of exogenous spatial weighting matrix and exogenous regressors, the unknown parameter and varying-coefficient component are estimated by applying the instrumental variable estimation. Under some sufficient conditions, the proposed estimator for the finite dimensional parameter is shown to be root- N consistent and asymptotically normally distributed. The proposed estimator for the varying-coefficient part is consistent and also asymptotically distributed. Consistent estimators for the asymptotic variance–covariance matrices of both the parametric and varying-coefficient components are provided. Simulation results are provided to illustrate the finite sample behavior of the proposed estimation methods and show that the proposed approach has some value in practice.