Where is the Economics in Spatial Econometrics?
AbstractSpatial econometrics has been criticized by some economists because some model specifications have been driven by data-analytic considerations rather than having a firm foundation in economic theory. In particular this applies to the so-called W matrix, which is integral to the structure of endogenous and exogenous spatial lags, and to spatial error processes, and which are almost the sine qua non of spatial econometrics. Moreover it has been suggested that the significance of a spatially lagged dependent variable involving W may be misleading, since it may be simply picking up the effects of omitted spatially dependent variables, incorrectly suggesting the existence of a spillover mechanism. In this paper we review the theoretical and empirical rationale for network dependence and spatial externalities as embodied in spatially lagged variables, arguing that failing to acknowledge their presence at least leads to biased inference, can be a cause of inconsistent estimation, and leads to an incorrect understanding of true causal processes.
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Bibliographic InfoPaper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0071.
Date of creation: Mar 2011
Date of revision:
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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp
Spatial econometrics; endogenous spatial lag; exogenous spatial lag; spatiallydependent errors; network dependence; externalities; the W matrix; panel data with spatialeffects; multilevel models with spatial effects;
Other versions of this item:
- Luisa Corrado & Bernard Fingleton, 2011. "Where is the Economics in Spatial Econometrics?," Working Papers 1101, University of Strathclyde Business School, Department of Economics.
- Corrado, L. & Fingleton, B., 2011. "Where is the economics in spatial econometrics?," SIRE Discussion Papers 2011-02, Scottish Institute for Research in Economics (SIRE).
- Luisa Corrado & Bernard Fingleton, 2011. "Where is the economics in spatial econometrics?," LSE Research Online Documents on Economics 33581, London School of Economics and Political Science, LSE Library.
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-26 (All new papers)
- NEP-GEO-2011-03-26 (Economic Geography)
- NEP-HPE-2011-03-26 (History & Philosophy of Economics)
- NEP-URE-2011-03-26 (Urban & Real Estate Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Put some economics back into spatial econometrics
by Economic Logician in Economic Logic on 2012-05-25 14:54:00
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