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Fitting Spatial Econometric Models through the Unilateral Approximation

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  • Giuseppe Arbia
  • Marco Bee
  • Giuseppe Espa
  • Flavio Santi

Abstract

Maximum likelihood estimation of spatial models based on weight matrices typically requires a sizeable computational capacity, even in rel- atively small samples. The unilateral approximation approach to spatial models estimation has been suggested in Besag (1974) as a viable alternat- ive to MLE for conditionally specified processes. In this paper we revisit the method, extend it to simultaneous spatial processes and study the finite-sample properties of the resulting estimators by means of Monte Carlo simulations, using several Conditional Autoregressive Models. Ac- cording to the results, the performance of the unilateral estimators is very good, both in terms of statistical properties (accuracy and precision) and in terms of computing time.

Suggested Citation

  • Giuseppe Arbia & Marco Bee & Giuseppe Espa & Flavio Santi, 2014. "Fitting Spatial Econometric Models through the Unilateral Approximation," DEM Discussion Papers 2014/08, Department of Economics and Management.
  • Handle: RePEc:trn:utwpem:2014/08
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    References listed on IDEAS

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    1. Pace, R. Kelley & LeSage, James P., 2004. "Chebyshev approximation of log-determinants of spatial weight matrices," Computational Statistics & Data Analysis, Elsevier, vol. 45(2), pages 179-196, March.
    2. Flavio Bazzana & Anna Zadorozhnaya & Roberto Gabriele, 2014. "The role of covenants in bond issue and investment policy. The case of Russian companies," DEM Discussion Papers 2014/05, Department of Economics and Management.
    3. Yongtao Guan & Michael Sherman & James A. Calvin, 2004. "A Nonparametric Test for Spatial Isotropy Using Subsampling," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 810-821, January.
    4. Bee, Marco & Riccaboni, Massimo & Schiavo, Stefano, 2017. "Where Gibrat meets Zipf: Scale and scope of French firms," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 481(C), pages 265-275.
    5. LeSage, James P. & Kelley Pace, R., 2007. "A matrix exponential spatial specification," Journal of Econometrics, Elsevier, vol. 140(1), pages 190-214, September.
    6. Hien Tran & Enrico Santarelli & Enrico Zaninotto, 2015. "Efficiency or bounded rationality? Drivers of firm diversification strategies in Vietnam," Journal of Evolutionary Economics, Springer, vol. 25(5), pages 983-1010, November.
    7. Giuseppe Arbia & Marco Bee & Giuseppe Espa, 2013. "Testing Isotropy in Spatial Econometric Models," Spatial Economic Analysis, Taylor & Francis Journals, vol. 8(3), pages 228-240, September.
    8. Edoardo Gaffeo & Ronny Mazzocchi, 2014. "Competition in the banking sector and economic growth: panel-based international evidence," DEM Discussion Papers 2014/02, Department of Economics and Management.
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