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Structural Interactions in Spatial Panels

Structural Interactions in Spatial Panels

Research output: Working paper

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  • Arnab Bhattacharjee
  • Sean Holly

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Original languageEnglish
Place of PublicationSt. Andrews
PublisherScottish Institute for Research in Economics
Number of pages43
StatePublished - 2009

Publication series

NameSIRE Discussion Papers
PublisherScottish Institute for Research in Economics


Until recently, much effort has been devoted to the estimation of panel data regression models without adequate attention being paid to the drivers of diffusion and interaction across cross section and spatial units. We discuss some new methodologies in this emerging area and demonstrate their use in measurement and inferences on cross section and spatial interactions. Specifically, we highlight the important distinction between spatial dependence driven by unobserved common factors and those based on a spatial weights matrix. We argue that, purely factor driven models of spatial dependence may be somewhat inadequate because of their connection with the exchangeability assumption. Limitations and potential enhancements of the existing methods are discussed, and several directions for new research are highlighted.

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