How to Get Rid of W: A Latent Variables Approach to Modelling Spatially Lagged Variables

Henk Folmer () and Johan Oud
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Johan Oud: Behavioural Science Institute, Radboud University Nijmegen, PO Box 9104, NL-6500 HE Nijmegen, The Netherlands

Environment and Planning A, 2008, vol. 40, issue 10, 2526-2538

Abstract: In this paper we propose a structural equation model (SEM) with latent variables to model spatial dependence. Rather than using the spatial weights matrix W, we propose to use latent variables to represent spatial dependence and spillover effects, of which the observed spatially lagged variables are indicators. This approach allows us to incorporate and test more information on spatial dependence and offers more flexibility than the representation in terms of Wy or Wx. Furthermore, we adapt the ML estimator included in the software package Mx to estimate SEMs with spatial dependence. We present illustrations based on Anselin's Columbus, Ohio, crime dataset.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:sae:envira:v:40:y:2008:i:10:p:2526-2538

DOI: 10.1068/a4078

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