The authors discuss how scholars can bring theories of spatial policy dependence and empirical model specifications closer in line so that the empirical analysis actually tests the theoretical predictions. Comprehensive theories of spatial policy dependence typically suggest that the jurisdictions receiving spatial stimuli systematically differ in their exposure to such signals as a function of the intensity of their interaction with other jurisdictions. Similarly, theories often predict that governments also differ in their responsiveness to any given spatial stimulus as a function of the institutional, political, economic, or social context in which they operate. In other words, theories typically postulate that spatial dependence is conditional on exposure and responsiveness, neither of which is accounted for in the standard empirical practice of estimating one single common coefficient for a row-standardized spatial lag variable. The authors show how scholars can adequately model both forms of heterogeneity with properly specified interaction effects models.
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