Selecting the Most Adequate Spatial Weighting Matrix:A Study on Criteria

Marcos Herrera Gómez, Jesus Mur and Manuel Ruiz Marin
Authors registered in the RePEc Author Service: Marcos Herrera Gómez

MPRA Paper from University Library of Munich, Germany

Abstract: In spatial econometrics, it is customary to specify a weighting matrix, the so-called W matrix, by choosing one matrix from a finite set of matrices. The decision is extremely important because, if the W matrix is misspecified, the estimates are likely to be biased and inconsistent. However, the procedure to select W is not well defined and, usually, it reflects the judgments of the user. In this paper, we revise the literature looking for criteria to help with this problem. Also, a new nonparametric procedure is introduced. Our proposal is based on a measure of the information, conditional entropy. We compare these alternatives by means of a Monte Carlo experiment.

Keywords: Spatial weighting matrix; Nonparametric procedure; Conditional entropy (search for similar items in EconPapers)
JEL-codes: C12 C21 C52 (search for similar items in EconPapers)
Date: 2012-07
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Citations: View citations in EconPapers (4)

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