Spatial Growth Regressions: Model Specification, Estimation and Interpretation
51 Pages Posted: 18 Apr 2007
Date Written: April 17, 2007
This paper uses Bayesian model comparison methods to simultaneously specify both the spatial weight structure and explanatory variables for a spatial growth regression involving 255 NUTS 2 regions across 25 European countries. In addition, a correct interpretation of the spatial regression parameter estimates that takes into account the simultaneous feedback nature of the spatial autoregressive model is provided. Our findings indicate that incorporating model uncertainty in conjunction with appropriate parameter interpretation decreased the importance of explanatory variables traditionally thought to exert an important influence on regional income growth rates.
Keywords: model uncertainty, Bayesian model averaging, spatial weight structures
JEL Classification: C11, C21, O47, O52, R11
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