Pollution and Expenditures in a Penalized Vector Spatial Autoregressive Time Series Model with Data-Driven Networks

Bo Andree, Phoebe Girouard Spencer, Sardar Azari, Andres Chamorro, Dieter Wang and Harun Dogo

No 8757, Policy Research Working Paper Series from The World Bank

Abstract: This paper introduces a Spatial Vector Autoregressive Moving Average (SVARMA) model in which multiple cross-sectional time series are modeled as multivariate, possibly fat-tailed, spatial autoregressive ARMA processes. The estimation requires specifying the cross-sectional spillover channels through spatial weights matrices. the paper explores a kernel method to estimate the network topology based on similarities in the data. It discusses the model and estimation, focusing on a penalized Maximum Likelihood criterion. The empirical performance of the estimator is explored in a simulation study. The model is used to study a spatial time series of pollution and household expenditure data in Indonesia. The analysis finds that the new model improves in terms of implied density, and better neutralizes residual correlations than the VARMA, using fewer parameters. The results suggest that growth in household expenditures precedes pollution reduction, particularly after the expenditures of poorer households increase; that increasing pollution is followed by reduced growth in expenditures, particularly reducing the growth of poorer households; and that there are significant spillovers from bottom-up growth in expenditures. The paper does not find evidence for top-down growth spillovers. Feedback between the identified mechanisms may contribute to pollution-poverty traps and the results imply that pollution damages are economically significant.

Keywords: Global Environment; Inequality; Brown Issues and Health; Air Quality&Clean Air; Pollution Management&Control; Health Service Management and Delivery (search for similar items in EconPapers)
Date: 2019-02-25
New Economics Papers: this item is included in nep-ecm, nep-env, nep-ets, nep-sea and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://documents.worldbank.org/curated/en/162631551119359071/pdf/WPS8757.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:8757

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().