Spatial Regression-Based Model Specifications for Exogenous and Endogenous Spatial Interaction

27 Pages Posted: 6 Apr 2014

See all articles by James P. LeSage

James P. LeSage

Texas State University - McCoy College of Business Administration

Manfred M. Fischer

Vienna University of Economics and Business - Institute for Economic Geography and GIScience, Department of Socioeconomics

Date Written: March 18, 2014

Abstract

The focus here is on the log-normal version of the spatial interaction model. In this context, we consider spatial econometric specifications that can be used to accommodate two types of dependence scenarios, one involving endogenous interaction and the other exogenous interaction. These model specifications replace the conventional assumption of independence between origin-destination-flows with formal approaches that allow for two different types of spatial dependence in flow magnitudes. Endogenous interaction reflects situations where there is reaction to feedback regarding flow magnitudes from regions neighboring origin and destination regions. This type of interaction can be modeled using specifications proposed by LeSage and Pace (2008) who use spatial lags of the dependent variable to quantify the magnitude and extent of feedback effects, hence the term endogenous interaction.

Exogenous interaction represents a situation where spillover arise from nearby (or perhaps even distant) regions, and these need to be taken into account when modeling observed variation in flows across the network of regions. In contrast to endogenous interaction, these contextual effects do not generate reaction to the spillovers, leading to a model specification that can be interpreted without considering changes in the long-run equilibrium state of the system of flows. We discuss issues pertaining to interpretation of estimates from these two types of model specification, and provide an empirical illustration.

Keywords: endogenous interaction, exogenous interaction, spillovers

JEL Classification: C11, C23, O47, O52

Suggested Citation

LeSage, James P. and Fischer, Manfred M., Spatial Regression-Based Model Specifications for Exogenous and Endogenous Spatial Interaction (March 18, 2014). Available at SSRN: https://ssrn.com/abstract=2420746 or http://dx.doi.org/10.2139/ssrn.2420746

James P. LeSage (Contact Author)

Texas State University - McCoy College of Business Administration ( email )

Finanace and Economics Department
601 University Drive
San Marcos, TX 78666
United States
512-245-0256 (Phone)
512-245-3089 (Fax)

HOME PAGE: http://www.spatial-econometrics.com

Manfred M. Fischer

Vienna University of Economics and Business - Institute for Economic Geography and GIScience, Department of Socioeconomics ( email )

Welthandelsplatz 1, D4
Vienna, 1020
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
167
Abstract Views
958
Rank
336,393
PlumX Metrics