On the specification of regression models with spatial dependence - an application of the accessibility concept

Martin Andersson () and Urban Gråsjö ()

No 51, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: Using the taxonomy by Anselin (2003), this paper investigates how the inclusion of spatially discounted variables on the ‘right-hand-side’ (RHS) in empirical spatial models affects the extent of spatial autocorrelation. The basic proposition is that the inclusion of inputs external to the spatial observation in question as a separate variable reveals spatial dependence via the parameter estimate. One of the advantages of this method is that it allows for a direct interpretation. The paper also tests to what extent significance of the estimated parameters of the spatially discounted explanatory variables can be interpreted as evidence of spatial dependence. Additionally, the paper advocates the use of the accessibility concept for spatial weights. Accessibility is related to spatial interaction theory and can be motivated theoretically by adhering to the preference structure in random choice theory. Monte Carlo Simulations show that the coefficient estimates of the accessibility variables are significantly different from zero in the case of modelled effects. The rejection frequency of the three typical tests (Moran’s I, LM-lag and LM-err) is significantly reduced when these additional variables are included in the model. When the coefficient estimates of the accessibility variables are statistically significant, it suggests that problems of spatial autocorrelation are significantly reduced. Significance of the accessibility variables can be interpreted as spatial dependence

Keywords: accessibility; spatial dependence; spatial econometrics; Monte Carlo Simulations; spatial spillovers (search for similar items in EconPapers)
JEL-codes: C31 C51 R15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-ecm and nep-geo
Date: 2006-03-28
Note: accessibility, spatial dependence, spatial econometrics, Monte Carlo Simulations, spatial spillovers
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:cesisp:0051

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