Mostly Pointless Spatial Econometrics?
Paper No' SERCDP0061:
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Keywords: statistical methods; spatial, modeling
JEL Classification: C1; C12; C21; R000; R15
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We argue that identification problems bedevil most applied spatial research. Spatial
econometrics solves these problems by deriving estimators assuming that functional forms
are known and by using model comparison techniques to let the data choose between
competing specifications. We argue that in most situations of interest this, at best, achieves
only very weak identification. Worse, in most cases, such an approach will simply be
uninformative about the economic processes at work rendering much applied spatial
econometric research ‘pointless’, unless the main aim is simply description of the data. We
advocate an alternative approach based on the ‘experimental paradigm’ which puts issues of
identification and causality at centre stage.