The m-STAR Model as an Approach to Modeled, Dynamic, Endogenous Interdependence in Comparative & International Political Economy

Abstract

Even casual observation reveals obvious spatial patterns in labor-market outcomes and policies across the developed democracies, and within the European Union particularly. Labor-market policies entail significant cross-border spillovers, so strategic interdependence among developed democracies might explain this. However, these countries also faced common or very similar exogenous-external conditions and internal trends, which would also tend to generate spatial patterns in the domestic responses thereto, even without any interdependence. Likewise, membership in the EU itself presents both a series of common external stimuli and a set of strategic interdependencies in common and individual-country labor-market-relevant actions. Additionally, however, labor-market policies will themselves shape the patterns of economic interchange by which some of the interdependencies arise, and entry into the European Union typically presupposes a certain baseline set of shared national characteristics and orientations, raising the possibility that labor-market policies and the pattern of interdependence via institutional co-membership have common origin. That is, the policies of interest may also shape the patterns of connectivity affecting those outcomes, a complex sort of endogeneity known as selection in the dynamic networks literature. We have discussed elsewhere the severe empirical-methodological challenges in distinguishing the first two of these possible sources of spatial correlation (Galton's Problem). This paper extends those analyses, applying the multiparametric spatiotemporal autoregressive (m-STAR) model as a simple approach to modeling the patterns of interdependence simultaneously with its effects, while recognizing their possible endogeneity (i.e., selection). We do so in an empirical application attempting to disentangle the roles of economic interdependence, correlated external and internal stimuli, and EU membership in shaping labor-market policies in recent years.

Keywords: Spatial Econometrics, Spatial Interdependence, Network Dependence, Multiple Spatial Lags, Spatiotemporal Model, Estimated-W Spatial-Lag Model, Endogenous-W Spatial-Lag Model, Multiperametric Spatiotemporal Model

JEL Classification: C1, C13, C19, C23, C33, C49, J68, R1