Estimation of the Spatial Weights Matrix under Structural Constraints

Arnab Bhattacharjee, Chris Jensen-Butler

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    Abstract

    While estimates of models with spatial interaction are very sensitive to the choice of spatial weights, considerable uncertainty surrounds de nition of spatial weights in most studies with cross-section dependence. We show that, in the spatial error model the spatial weights matrix is only partially identi ed, and is fully identifi ed under the structural constraint of symmetry. For the spatial error model, we propose a new methodology for estimation of spatial weights under the assumption of symmetric spatial weights, with extensions to other important spatial models. The methodology is applied to regional housing markets in the UK, providing an estimated spatial weights matrix that generates several new hypotheses about the economic and socio-cultural drivers of spatial di¤usion in housing demand.
    Original languageEnglish
    Place of PublicationSt. Andrews
    PublisherScottish Institute for Research in Economics
    Publication statusPublished - 2011

    Publication series

    NameSIRE Discussion Papers
    PublisherScottish Institute for Research in Economics
    No.2011-48

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    Cite this

    Bhattacharjee, A., & Jensen-Butler, C. (2011). Estimation of the Spatial Weights Matrix under Structural Constraints. (SIRE Discussion Papers; No. 2011-48). Scottish Institute for Research in Economics . http://ideas.repec.org/p/edn/sirdps/293.html