Where is the economics in spatial econometrics?
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Spatial econometrics has been criticized by some economists because some model specifications have been driven by data-analytic considerations rather than having a firm foundation in economic theory. In particular this applies to the so-called W matrix, which is integral to the structure of endogenous and exogenous spatial lags, and to spatial error processes, and which are almost the sine qua non of spatial econometrics. Moreover it has been suggested that the significance of a spatially lagged dependent variable involving W may be misleading, since it may be simply picking up the effects of omitted spatially dependent variables, incorrectly suggesting the existence of a spillover mechanism. In this paper we review the theoretical and empirical rationale for network dependence and spatial externalities as embodied in spatially lagged variables, arguing that failing to acknowledge their presence at least leads to biased inference, can be a cause of inconsistent estimation, and leads to an incorrect understanding of true causal processes.
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Bhattacharjee, Arnab; de Castro, Eduardo Anselmo; Marques, João Lourenço (University of DundeeUniversity of Aveiro, 2011)Spatial heterogeneity, spatial dependence and spatial scale constitute key features of spatial analysis of housing markets. However, the common practice of modelling spatial dependence as being generated by spatial ...
Bhattacharjee, Arnab; Jensen-Butler, Chris (University of DundeeUniversity of St Andrews, 2011)While estimates of models with spatial interaction are very sensitive to the choice of spatial weights, considerable uncertainty surrounds de nition of spatial weights in most studies with cross-section dependence. We ...
Bhattacharjee, Arnab; Holly, Sean (University of St AndrewsUniversity of Cambridge, 2009)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 ...