THE SLX MODEL

Journal of Regional Science - Tập 55 Số 3 - Trang 339-363 - 2015
Solmaria Halleck Vega1, J. Paul Elhorst1
1Faculty of Economics and Business, University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands

Tóm tắt

ABSTRACTWe provide a comprehensive overview of the strengths and weaknesses of different spatial econometric model specifications in terms of spillover effects. Based on this overview, we advocate taking the SLX model as point of departure in case a well‐founded theory indicating which model is most appropriate is lacking. In contrast to other spatial econometric models, the SLX model also allows for the spatial weights matrix W to be parameterized and the application of standard econometric techniques to test for endogenous explanatory variables. This starkly contrasts commonly used spatial econometric specification strategies and is a complement to the critique of spatial econometrics raised in a special theme issue of the Journal of Regional Science (Volume 52, Issue 2). To illustrate the pitfalls of the standard spatial econometrics approach and the benefits of our proposed alternative approach in an empirical setting, the Baltagi and Li (2004) cigarette demand model is estimated.

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