Spatial econometrics in about 40 minutes

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Spatial econometrics in about 40 minutes

• Bernard Fingleton
• University of Strathclyde

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Spatial econometrics in about 40 minutes

• Why spatial econometrics?
• Spatial economics now widely recognised in the
  economics mainstream
• Krugmans Nobel prize for work on economic
  geography
• Importance of network economics (eg Royal
  Economic Society Easter 2009 School , on
  Auctions and Networks)
• LSE ESRC Centre for Spatial Economics
• Increasing policy relevance World Bank (2008),
  World Development Report 2009, World Bank,
  Washington.
• The standard time series econometric tools are
  not relevant for spatial series

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What is spatial econometrics?

• the theory and methodology appropriate to the
  analysis of spatial series relating to the
  economy
• spatial series means each variable is distributed
  not in time as in conventional, mainstream
  econometrics, but in space.

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DGP for time series
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DGP for time series
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DGP for time series
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DGP for time series
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DGP for time series
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DGP for spatial series
W
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DGP for spatial series
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DGP for spatial series
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DGP for spatial series
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DGP for spatial series
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Spatial versus time series

• problem concerning W
• Close together in time is easily defined
• There are many different metrics for measuring
  closeness in space
• The simplest is contiguity(1,0), where locations
  1 denotes locations sharing the same boundary
• Some alternatives for W
• straight line distance
• great circle distance
• economic distance trade costs, market access
• travel time
• distance in market product space if the n
  objects are say companies and not places
• social network distance between people

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Some typical models
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Some typical models
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Estimation

• ML typically used but problems..
• No large sample theory
• Fails to handle other endogenous variables on
  rhs, i.e. excluding spatial lag (Wy)
• Assumes normality, or some other specific
  distribution, 2SLS/GM robust
• ML requires eigenvalues of W matrix, if N large
  this may be problematic

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Some typical models
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Estimation
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Some applications
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The NEG wage equation
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The NEG wage equation
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The NEG wage equation
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Some applications
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Some applications
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Some applications
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Some applications
Bernard Fingleton and Julie Le Gallo "Estimating
spatial models with endogenous variables, a
spatial lag and spatially dependent disturbances
Finite sample properties Papers in Regional
Science, Volume 87, Number 3, August 2008.
Results can be replicated in Stata
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Some applications

• http//www.sml.hw.ac.uk/ecomes/peebles/
• Contains Stata data file
• Stata do file
• Stata log file

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English house prices in 2000
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English house prices in 2000
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DGP for spatial series
W
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English house prices in 2000
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English house prices in 2000
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International shock transmission
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International shock transmission
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International shock transmission
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International shock transmission
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International shock transmission
Impact of a positive shock (3 s.d.) to the UK On
real GDP pw
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spatial econometrics software

• MATLAB
• Many routines available on James LeSages
  webpages
• Advanced spatial econometrics using MATLAB,
  available from
• http//www.spatial-econometrics.com/
• Stata
• Some routines forthcoming and available
• David Drukker's package. When available, The
  package is described here http//repec.org/snasug
  08/drukker_spatial.pdf.

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Course

• Second "Spatial Econometrics Advanced Institute"
  that will be held again in Rome in Amy-June 2009.
  The deadline for applications is the end of
  January. All the details may be found at the
  website Www.Spatialeconometricsadvancedinstitute.o
  rg

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books

• Anselin L (1988) Spatial Econometrics Methods
  and Models. Dordrecht Kluwer.
• Anselin L (2001) Spatial Econometrics, in B.
  Baltagi (ed) A Companion to Theoretical
  Econometrics, Blackwell Oxford, 310-330
• Anselin L (2006) 'Spatial econometrics' in TC
  Mills and K Patterson (eds) Palgrave Handbook of
  Econometrics vol 1 Econometric theory Palgrave
  Macmillan 2006 901-969