Spatial Interdependence in Comparative and International Political Economy

28 Pages Posted: 11 Feb 2008

See all articles by Robert J. Franzese

Robert J. Franzese

University of Michigan

Jude C. Hays

University of Pittsburgh

Date Written: February 4, 2008


Interdependence is ubiquitous, and often central, across political economy. In comparative political economy, for example, globalization and rising capital mobility imply tax competition that suggests the fiscal policies of one country must depend crucially upon those of other countries with which it competes for capital. In international political economy, to give another example, security concerns and the global structure of military alliances are likely to make trade flows interdependent across country dyads. We explain how any situation that involves externalities from one unit's actions on others' implies interdependence and show how to model such interdependent processes empirically. We discuss how to estimate properly specified interdependence models with spatial lags by maximum likelihood and how to interpret and present the resulting estimated spatio-temporal effects, response paths, and long-run steady-states, with their associated standard errors. We illustrate with replications of two noteworthy earlier studies from comparative and international political economy.

Keywords: Political Economy, Globalization, Interdependence, Strategic Interactions, Spatial Econometrics, Taxation, Trade

JEL Classification: C33, F59, P16

Suggested Citation

Franzese, Robert J. and Hays, Jude C., Spatial Interdependence in Comparative and International Political Economy (February 4, 2008). Available at SSRN: or

Robert J. Franzese (Contact Author)

University of Michigan ( email )

Ann Arbor, MI 48109
United States
734-936-1850 (Phone)
734-764-3341 (Fax)


Jude C. Hays

University of Pittsburgh ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

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