A Monte Carlo experiment illustrates one of the pitfalls of spatial modeling. Specification tests indicate spatial autocorrelation when functional form misspecification is actually the only problem with the model. Incorrect functional forms and omitted variables that are correlated over space produce spurious spatial autocorrelation.
Get full access to this article
View all access options for this article.
References
1.
Anselin, L. 1988. Spatial econometrics: Methods and models. Boston: Kluwer Academic .
2.
Anselin, L., A. Bera, R. Florax, and M. Yoon. 1996. Simple diagnostic tests for spatial dependence . Regional Science and Urban Economics26: 77-104 .
3.
Anselin, L., A. Varga, and Z. Acs. 1997. Local geographic spillovers between university research and high technology innovations . Journal of Urban Economics42: 422-48 .
4.
Breusch, T., and A. Pagan. 1979. A simple test for heteroskedasticity and random coefficient variation . Econometrica47: 1287-94 .
5.
Brueckner, J.K. 1998. Testing for strategic interaction among local governments: The case of growth controls . Journal of Urban Economics44: 438-67 .
Burridge, P. 1980. On the Cliff-Ord test for spatial autocorrelation . Journal of the Royal Statistical SocietyB42: 107-8 .
8.
Cleveland, W.S., and S.J. Devlin. 1988. Locally weighted regression: An approach to regression analysis by local fitting . Journal of the American Statistical Association83: 596-610 .
9.
Craig, S.G., and P.T. Ng. 2001. Using quantile smoothing splines to identify employment subcenters in a multicentric urban area . Journal of Urban Economics49: 100-120 .
10.
Florax, R.J.G.M., H. Folmer, and S. Rey. 2002. Specification searches in spatial econometrics: The relevance of Hendry’s methodology. Manuscript, Free University, Amsterdam.
11.
Fu, Y., and S.T. Somerville. 2001. Site density restrictions: Measurement and empirical analysis . Journal of Urban Economics49: 404-23 .
12.
Giuliano, G., and K.A. Small. 1991. Subcenters in the Los Angeles region . Regional Science and Urban Economics21: 163-82 .
13.
Graaf, T. de, R.J.G.M. Florax, P. Nijkamp, and A. Reggiani. 2001. A general misspecification test for spatial regression models: Dependence, heterogeneity, and nonlinearity . Journal of Regional Science41: 255-76 .
14.
McDonald, J.F. 1987. The identification of urban employment subcenters . Journal of Urban Economics21: 242-58 .
15.
McMillen, D.P. 1996. One hundred fifty years of land values in Chicago: A nonparametric approach . Journal of Urban Economics40: 100-124 .
McMillen, D.P., and J.F. McDonald. 1997. A nonparametric analysis of employment density in a polycentric city . Journal of Regional Science37: 591-612 .
18.
Meese, R., and N. Wallace. 1991. Nonparametric estimation of dynamic hedonic price models and the construction of residential housing price indices . Journal of the American Real Estate and Urban Economics Association19: 308-32 .
19.
—. 1997. The construction of residential housing price indexes: A comparison of repeat sales, hedonic regression, and hybrid approaches . Journal of Real Estate Finance and Economics14: 51-73 .
20.
Pagan, A., and A. Ullah. 1999. Nonparametric econometrics. NewYork: Cambridge University Press .
21.
Pavlov, A.D. 2000. Space-varying regression coefficients: A semi-parametric approach applied to real estate markets . Real Estate Economics28: 249-83 .
22.
White, H. 1980. A heteroscedasticity-consistent covariance matrix estimator and a direct test for heteroscedasticity . Econometrica48: 817-38 .
