Spatial panels: Random components versus fixed effects

This article investigates spatial panel data models with a space-time filter in disturbances. We consider their estimation by both fixed effects and random effects specifications. With a between equation properly defined, the difference of the random versus fixed effects models can be highlighted. We show that the random effects estimate is a pooling of the within and between estimates. A Hausman-type specification test and an Lagrangian multiplier test are proposed for the testing of the random components specification versus the fixed effects specification.