Simultaneous Spatial Autoregressive Generalized Two-Stage Least Square Panel Data Model with Fixed Effect and Two-Way Error Component of Inclusive Growth Indicators in Indonesia

Abstract

Spatial models have attracted considerable interest in the recent economics both on an empirical and theoretical level. One of the most widely used spatial models is the single equation model. Spatial simultaneous equation model as an extension of the widely used spatial single equation model and can uses more than one equations. Simultaneous equation models using panel data, especially for fixed effect with two way error component where there are spatial autoregressive still few of their development and requaire to be developed. This paper proposed Generalized Spatial two stage least square (GS2SLS) two way error component model to describes the simultaneous relationship between four inclusive growth indicators and spatial linkages between regions in 34 provinces in Indonesia (2015-2019) The results prove that there are simultaneous relationships between the four indicators and spatial linkages between regions in Indonesia.