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Misspecification of Space: An Illustration Using Growth Convergence Regressions

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  • Jan Mutl

    ()
    (Money and Macro Goethe University)

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Abstract

I illustrate the importance of choosing the correct space in empirical applications of spatial econometric models. I consider different spatial weighting matrices in an SAR(1) model -- contiguity matrix, distance based matrix and their variants adjusted for size of each observation. I show formally that only the modified weighting matrices imply specifications that are robust to changes in the sample size. I demonstrate the effect of spatial misspecification by presenting simulations of a regional convergence model. The different specification of space are also estimated using European regional data. The results confirm the sensitivity of the conclusion with respect to the choice of the space.

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 436.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:436

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Keywords: beta convergence; spatial econometrics;

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Cited by:
  1. Paul A. Raschky & Hannelore Weck-Hannemann, . "Who is going to save us now? Bureaucrats, Politicians and Risky Tasks," Working Papers 2007-29, Faculty of Economics and Statistics, University of Innsbruck.
  2. Kristien Werck & Bruno Heyndels & Benny Geys, 2008. "The impact of ‘central places’ on spatial spending patterns: evidence from Flemish local government cultural expenditures," Journal of Cultural Economics, Springer, vol. 32(1), pages 35-58, March.

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