ProbitSpatialFit {ProbitSpatial} | R Documentation |
Fit a spatial probit model.
Description
Approximate likelihood estimation of the probit model with spatial autoregressive (SAR), spatial error (SEM), spatial autoregressive with autoregressive disturbances (SARAR).
Usage
ProbitSpatialFit(formula,data,W,
DGP='SAR',method="conditional",varcov="varcov",
M=NULL,control=list())
Arguments
formula |
an object of class |
data |
the data set containing the variables of the model. |
W |
the spatial weight matrix of class |
DGP |
the data generating process of |
method |
the optimisation method: |
varcov |
the likelihood function is computed using the
variance-covariance matrix ( |
M |
the second spatial weight matrix for SARAR models. Same class as W. |
control |
a list of control parameters. See Details. |
Details
The estimation is based on the approximate value of the true likelihood of spatial probit models. The DGP of the spatial autoregressive model (SAR) model is the following
y = \rho Wy + X\beta + \epsilon,
where the disturbances \epsilon
are iid standard normally distributed,
W
is a sparse spatial weight matrix and \rho
is the spatial lag
parameter. The variance of the error term is equal
to \Sigma=\sigma^2((I_n-\rho W)^{-1}((I_n-\rho W)^{-1})^{t})
.
The DGP of the spatial error model (SEM) is as follows
y = X\beta+u,
u = \rho W u + \epsilon,
where the disturbances \epsilon
are iid standard normally distributed,
W
is a sparse spatial weight matrix and \rho
is the spatial
error parameter. The variance of the error term
is equal to \Sigma=\sigma^2((I_n-\rho W)^{-1}((I_n-\rho W
)^{-1})^{t})
.
The DGP of the spatial autoregressive model with autoregressive disturbances
(SARAR) is as follows
y = \rho Wy + X\beta + u,
u = \lambda M u + \epsilon,
where the disturbances \epsilon
are iid standard normally distributed,
W
and M
are two sparse spatial weight matrix, while \rho
and \lambda
are the spatial lag and spatial error parameters,
respectively. The variance of the error term
is equal to \Sigma=\sigma^2((I_n-\rho W)^{-1}(I_n-\lambda
M)^{-1}((I_n-\lambda M)^{-1})^{t}((I_n-\rho W)^{-1})^{t})
.
The approximation is inspired by the Mendell-Elston approximation
of the multivariante normal probabilities (see References). It makes use of
the Cholesky decomposition of the variance-covariance matrix \Sigma
.
The ProbitSpatialFit
command estimates the model by maximising the
approximate log-likelihood. We propose two optimisation method:
"conditional"
:it relies on a standard probit estimation which applies to the model estimated conditional on
\rho
."full-lik"
:it minimises the full-log-likelihood using the analytical gradient functions (only available for SAR and SEM specification). The optimisation is performed by means of the
optim
function withmethod = "BFGS"
.
In both cases a "conditional"
estimation is performed. If
method="conditional"
, then ProbitSpatialFit
returns
the results of this first estimation. In case method="full-lik"
,
the function tries to improve the log-likelihood by means of a further
exploration around the value of the parameters found by the conditional
step.
The conditional step is usually very accurate and particularly fast. The
second step is more time consuming and does not always improve the results
of the first step. We dissuade the user from using the full-likelihood
method for sample sizes bigger than ten thousands, since the computation of
the gradients is quite slow. Simulation studies reported in Martinetti and
Geniaux (2017) prove that the conditional estimation is highly reliable,
even if compared to the full-likelihood ones.
In order to reduce the computation time of the function
ProbitSpatialFit
, we propose a variant of the likelihood-function
estimation that uses the inverse of the variance-covariance matrix (a.k.a.
precision matrix). This variant applies to both the "conditional"
and
the "full-lik"
methods and can be invoked by setting
varcov="precision"
. Simulation studies reported in Martinetti and
Geniaux (2017) suggest that the accuracy of the results with the precision
matrix are sometimes worst than the one with the true variance-covariance
matrix, but the estimation time is considerably reduced.
The control argument is a list that can supply any of the following components:
iW_CL
the order of approximation of
(I_n-\rho W)^{-1}
used in the"conditional"
method. Default is 6, while 0 means no approximation (it uses exact inversion of matrixes, not suitable for big sample sizes). See Martinetti and Geniaux (2017) for further references.iW_FL
the order of approximation of
(I_n-\rho W)^{-1}
used in the computation of the likelihood function for the"full-lik"
method. Default is 0, meaning no approximation.iW_FG
the order of approximation of
(I_n-\rho W)^{-1}
used in the computation of the gradient functions for the"full-lik"
method. Default is 0, meaning no approximation.reltol
relative convergence tolerance. It represents
tol
inoptimize
function formethod="conditional"
andreltol
inoptim
function formethod="full-lik"
. Default is 1e-5.prune
the pruning value used in the gradients. Default is 0, meaning no pruning. Typacl values are around 1e-3 and 1e-6. They help reducing the estimation time of the gradient functions.
silent
Default is TRUE.
Value
Return an object of class ProbitSpatial
.
References
- Mendell and Elston (1974)
N. Mendell and R. Elston. Multifactorial qualitative traits: genetic analysis and prediction of recurrence risks. Biometrics 30, 41–57, 1974.
- Martinetti and Geniaux (2017)
D. Martinetti and G. Geniaux. Approximate likelihood estimation of spatial probit models. Regional Science and Urban Economics 64, 30-45, 2017.
Examples
n <- 1000
nneigh <- 3
rho <- 0.5
beta <- c(4,-2,1)
W <- generate_W(n,nneigh,seed=123)
X <- cbind(1,rnorm(n,2,2),rnorm(n,0,1))
colnames(X) <- c("intercept","X1","X2")
y <- sim_binomial_probit(W=W,X=X,beta=beta,rho=rho,model="SAR")
d <- as.data.frame(cbind(y,X))
mod <- ProbitSpatialFit(y~X1+X2,d,W,
DGP='SAR',method="conditional",varcov="varcov")