Estimation of partially specified dynamic spatial panel data models with fixed-effects

This paper studies estimation of a partially specified spatial dynamic panel data regression with fixed-effects. Under the assumption of strictly exogenous regressors and strictly exogenous spatial weighting matrix, the model is estimated by 2SLS method aided by the sieve method and through the instrumental variable. 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 unknown function is shown to be consistent and asymptotically distributed as well, though at a rate slower than root-N. Consistent estimators for the asymptotic variance–covariance matrices of both estimators are provided. The results can be generalized to several spatial weighting matrices and spatial matrix which vary with time. The simulation results suggest that the proposed approach has some practical value.