Semiparametric filtering of spatial autocorrelation: the eigenvector approach
In the context of spatial regression analysis, several methods can be used to control for the statistical effects of spatial dependencies among observations. Maximum likelihood or Bayesian approaches account for spatial dependencies in a parametric framework, whereas recent spatial filtering approaches focus on nonparametrically removing spatial autocorrelation. In this paper we propose a semiparametric spatial filtering approach that allows researchers to deal explicitly with (a)�spatially lagged autoregressive models and (b)�simultaneous autoregressive spatial models. As in one nonparametric spatial filtering approach, a specific subset of eigenvectors from a transformed spatial link matrix is used to capture dependencies among the disturbances of a spatial regression model. However, the optimal subset in the proposed filtering model is identified more intuitively by an objective function that minimizes spatial autocorrelation rather than maximizes a model fit. The proposed objective function has the advantage that it leads to a robust and smaller subset of selected eigenvectors. An application of the proposed eigenvector spatial filtering approach, which uses a cancer mortality dataset for the 508 US State Economic Areas, demonstrates its feasibility, flexibility, and simplicity.
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