A feasible Spline-kernel estimate for short cross-sectional dependence panel data models

Abstract

In this paper, we take two different perspectives to cross-sectional dependence panel data model. We introduce the Spline-kernel method and the Quasi-Difference method to estimate the cross-sectional dependence panel data models in large n small T framework. Asymptotic distributions for the Spline-kernel estimators are derived. Monte Carlo simulations show good performances in finite samples. Empirical analysis of the impact of China’s infrastructure investment on economic growth suggests that infrastructure investment and urbanization rate showed very significant positive effects on current China’s economic growth.

Keywords:

• Panel data
• cross-sectional dependence
• Spline-kernel estimation
• Quasi-Difference estimation

JEL:

• C13
• C14
• C23