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Structural Interactions in Spatial Panels

  • Arnab Bhattacharjee
  • Sean Holly

Until recently, much effort has been devoted to the estimation of panel data regression models without adequate attention being paid to the drivers of diffusion and interaction across cross section and spatial units. We discuss some new methodologies in this emerging area and demonstrate their use in measurement and inferences on cross section and spatial interactions. Specifically, we highlight the important dis?tinction between spatial dependence driven by unobserved common factors and those based on a spatial weights matrix. We argue that, purely factor driven models of spatial dependence may be somewhat inadequate because of their connection with the exchangeability as?sumption. Limitations and potential enhancements of the existing methods are discussed, and several directions for new research are highlighted.

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Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 201003.

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Date of creation: 15 Jul 2010
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Handle: RePEc:san:cdmawp:1003
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