THE SLX MODEL

2015/02/06 by Solmaria Halleck Vega, J. Paul Elhorst · 629 citations
Economics, Econometrics and Finance · #Complement (music) #Computer science #Contrast (vision) #Econometric model #Econometrics #Economic and Environmental Valuation #Economics #Macroeconomics #Parameterized complexity #Regional Economics and Spatial Analysis #Spatial and Panel Data Analysis #Spatial econometrics #Specification #Spillover effect

paper · open access · doi:10.1111/jors.12188

published in Journal of Regional Science 55(3), 339-363 (Wiley)

openalex publication_date 2015/02/06 · openalex created_date 2016/06/24 · openalex updated_date 2026/08/06

Abstract

ABSTRACT We 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.

Citations

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