Estimation of spatial autoregressive models with randomly missing data in the dependent variable

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Abstract

Summary  We suggest and compare different methods for estimating spatial autoregressive models with randomly missing data in the dependent variable. Aside from the traditional expectation-maximization (EM) algorithm, a nonlinear least squares method is suggested and a generalized method of moments estimation is developed for the model. A two-stage least squares estimation with imputation is proposed as well. We analytically compare these estimation methods and find that generalized nonlinear least squares, best generalized two-stage least squares with imputation and best method of moments estimators have identical asymptotic variances. These methods are less efficient than maximum likelihood estimation implemented with the EM algorithm. When unknown heteroscedasticity exists, however, EM estimation produces inconsistent estimates. Under this situation, these methods outperform EM. We provide finite sample evidence through Monte Carlo experiments.

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