Maximum likelihood estimation and Lagrange multiplier tests for panel seemingly unrelated regressions with spatial lag and spatial errors An application to hedonic housing prices in Paris

This paper proposes maximum likelihood estimators for panel seemingly unrelated regressions with both spatial lag and spatial error components We study the general case where spatial effects are incorporated via spatial errors terms and via a spatial lag dependent variable and where the heterogeneity in the panel is incorporated via an error component specification We generalize the approach of Wang and Kockelman (2007) and propose Joint and conditional Lagrange multiplier tests for spatial autocorrelation and random effects for this spatial SUR panel model The small sample performance of the proposed estimators and tests are examined using Monte Carlo experiments An empirical application to hedonic housing prices in Pans illustrate these methods The proposed specification uses a system of three SUR equations corresponding to three types of flats within 80 districts of Paris over the period 1990-2003 We test for spatial effects and heterogeneity and find reasonable estimates of the shadow prices for housing characteristics (C) 2010 Elsevier Inc All rights reserved