What Regional Scientists Need to Know about Spatial Econometrics

Abstract

Regional scientists frequently work with regression relationships involving sample data that is spatial in nature. For example, hedonic house-price regressions relate selling prices of houses located at points in space to characteristics of the homes as well as neighborhood characteristics. Migration, commodity, and transportation flow models relate the size of flows between origin and destination regions to the distance between origin and destination as well as characteristics of both origin and destination regions. Regional growth regressions relate growth rates of a region to past period own- and nearby-region resource inputs used in production. Spatial data typically violates the assumption that each observation is independent of other observations made by ordinary regression methods. This has econometric implications for the quality of estimates and inferences drawn from nonspatial regression models. Alternative methods for producing point estimates and drawing inferences for relationships involving spatial data samples comprise the broad topic covered by spatial econometrics. Like any subdiscipline, spatial econometrics has its quirks, many of which reflect influential past literature that has gained attention in both theoretical and applied work. This article asks the question: “What should regional scientists who wish to use regression relationships involving spatial data in an effort to shed light on questions of interest in regional science know about spatial econometric methods?”