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Misspecification of Space: An Illustration Using Growth Convergence Regressions

Author

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  • Jan Mutl

    (Money and Macro Goethe University)

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.

Suggested Citation

  • Jan Mutl, 2006. "Misspecification of Space: An Illustration Using Growth Convergence Regressions," Computing in Economics and Finance 2006 436, Society for Computational Economics.
    • Handle: RePEc:sce:scecfa:436
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    Citations

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    Cited by:

    1. 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;The Association for Cultural Economics International, vol. 32(1), pages 35-58, March.
    2. Paul A. Raschky & Hannelore Weck-Hannemann, "undated". "Who is going to save us now? Bureaucrats, Politicians and Risky Tasks," Working Papers 2007-29, Faculty of Economics and Statistics, Universität Innsbruck.

    More about this item

    Keywords

    beta convergence; spatial econometrics;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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