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How to get rid of W: a latent variables approach to modelling spatially lagged variables

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Author Info

  • Henk Folmer
  • Johan Oud

Abstract

In this paper we propose a structural equation model (SEM) with latent variables to model spatial dependence. Rather than using the spatial weights matrix  W, we propose to use latent variables to represent spatial dependence and spillover effects, of which the observed spatially lagged variables are indicators. This approach allows us to incorporate and test more information on spatial dependence and offers more flexibility than the representation in terms of Wy or Wx. Furthermore, we adapt the ML estimator included in the software package Mx to estimate SEMs with spatial dependence. We present illustrations based on Anselin’s Columbus, Ohio, crime dataset.

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Bibliographic Info

Article provided by Pion Ltd, London in its journal Environment and Planning A.

Volume (Year): 40 (2008)
Issue (Month): 10 (October)
Pages: 2526-2538

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Handle: RePEc:pio:envira:v:40:y:2008:i:10:p:2526-2538

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Web page: http://www.pion.co.uk

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Citations

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Cited by:
  1. An Liu & Henk Folmer & Johan Oud, 2011. "Estimating regression coefficients by W-based and latent variables spatial autoregressive models in the presence of spillovers from hotspots: evidence from Monte Carlo simulations," Letters in Spatial and Resource Sciences, Springer, vol. 4(1), pages 71-80, March.
  2. Seya, Hajime & Yamagata, Yoshiki & Tsutsumi, Morito, 2013. "Automatic selection of a spatial weight matrix in spatial econometrics: Application to a spatial hedonic approach," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 429-444.
  3. Jesus Mur & Marcos Herrera & Manuel Ruiz, 2011. "Selecting the W Matrix. Parametric vs Nonparametric Approaches," ERSA conference papers ersa11p1055, European Regional Science Association.
  4. Herrera Gómez, Marcos & Cid, Juan Carlos & Paz, Jorge Augusto, 2012. "Introducción a la econometría espacial: Una aplicación al estudio de la fecundidad en la Argentina usando R
    [Introduction to Spatial Econometrics: An application to the study of fertility in Arg
    ," MPRA Paper 41138, University Library of Munich, Germany.
  5. Bhattacharjee, Arnab & Jensen-Butler, Chris, 2011. "Estimation of the Spatial Weights Matrix under Structural Constraints," SIRE Discussion Papers 2011-48, Scottish Institute for Research in Economics (SIRE).
  6. An Liu & Henk Folmer & Johan Oud, 2011. "W-based versus latent variables spatial autoregressive models: evidence from Monte Carlo simulations," The Annals of Regional Science, Springer, vol. 47(3), pages 619-639, December.
  7. Corrado, L. & Fingleton, B., 2011. "Where is the economics in spatial econometrics?," SIRE Discussion Papers 2011-02, Scottish Institute for Research in Economics (SIRE).
  8. An Liu & Inge Noback, 2011. "Determinants of regional female labour market participation in the Netherlands," The Annals of Regional Science, Springer, vol. 47(3), pages 641-658, December.
  9. Herrera Gómez, Marcos & Mur Lacambra, Jesús & Ruiz Marín, Manuel, 2011. "¿Cuál matriz de pesos espaciales?. Un enfoque sobre selección de modelos
    [Which spatial weighting matrix? An approach for model selection]
    ," MPRA Paper 37585, University Library of Munich, Germany.
  10. Jesús Mur & Jean Paelinck, 2011. "Deriving the W-matrix via p-median complete correlation analysis of residuals," The Annals of Regional Science, Springer, vol. 47(2), pages 253-267, October.
  11. Michael Brady & Elena Irwin, 2011. "Accounting for Spatial Effects in Economic Models of Land Use: Recent Developments and Challenges Ahead," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(3), pages 487-509, March.
  12. Li, Zhengtao & Folmer, Henk & Xue, Jianhong, 2014. "To what extent does air pollution affect happiness? The case of the Jinchuan mining area, China," Ecological Economics, Elsevier, vol. 99(C), pages 88-99.
  13. Danny Czamanski & Henk Folmer, 2011. "Introduction: some new methods in regional science," The Annals of Regional Science, Springer, vol. 47(3), pages 493-497, December.
  14. Bhattacharjee, Arnab & Jensen-Butler, Chris, 2013. "Estimation of the spatial weights matrix under structural constraints," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 617-634.
  15. Jesus Mur & Antonio Paez, 2011. "Local weighting or the necessity of flexibility," ERSA conference papers ersa11p942, European Regional Science Association.

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