Footnotes (18)




Eric Neumayer

London School of Economics and Political Science (LSE)

Thomas Plümper

University of Essex - Department of Government

May 1, 2013

In spatial econometrics, W refers to the matrix that weights the value of the spatially lagged variable of other units. As unimportant as it may appear, W specifies, or at least ought to specify, why and how other units of analysis affect the unit under observation. We show that theory must inform five crucial specification choices taken by researchers. Specifically, the connectivity variable employed in W must capture the causal mechanism of spatial dependence. The specification of W further determines the relative relevance of source units from which spatial dependence emanates and whether receiving units are assumed identically or differentially exposed to spatial stimulus. Multiple dimensions of spatial dependence can be modelled as independent, substitutive or conditional links. Finally, spatial effects need not go exclusively in one direction, but can be bi-directional instead, with recipients simultaneously experiencing positive spatial dependence from some sources and negative dependence from others. The importance of W stands in stark contrast to applied researchers typically employing crude proxy variables for true connectivity such as geographical proximity and adopting standard modelling convention for specifying W rather than substantive theory. We demonstrate which assumptions convention imposes on specification choices and argue that theories of spatial dependence will often conflict with them.

Number of Pages in PDF File: 41

Keywords: spatial dependence, spatial lag, spatial-x, spatial error, weighting matrix, connectivity, specification

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Date posted: January 30, 2013 ; Last revised: November 6, 2013

Suggested Citation

Neumayer, Eric and Plümper, Thomas, W (May 1, 2013). Available at SSRN: http://ssrn.com/abstract=2208706 or http://dx.doi.org/10.2139/ssrn.2208706

Contact Information

Eric Neumayer (Contact Author)
London School of Economics and Political Science (LSE) ( email )
Houghton Street
WC2A 2AE London
United Kingdom
+44 207 955 7598 (Phone)
+44 207 955 7412 (Fax)
HOME PAGE: http://personal.lse.ac.uk/neumayer
Thomas Plümper
University of Essex - Department of Government ( email )
Wivenhoe Park
Colchester, Essex CO4 3SQ
United Kingdom
HOME PAGE: http://www.polsci.org/pluemper
Feedback to SSRN

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