Centre for Development Economics
Department of Economics
Delhi School of Economics
ANNOUNCE A SEMINAR
Specification Selection under General Nesting Spatial Model
by
(IIT Kanpur)
(Thursday, March 12, 2026, at 2:00 PM IST )
Venue: Amex Room
Abstract:-
Spatial econometric models are increasingly becoming popular with the availability of spatial data. Specification selection of these models has been largely carried out using the tests constructed by Anselin et al. (1996). The crux of their paper was to identify the source of spatial dependence: whether through the dependent variable (lag) or through the error term. However, another source of dependence, namely the Durbin effect that takes account of the exogenous interaction effects among the cross-sectional units (locations) has become very popular in the literature. Conducting statistical tests while ignoring the Durbin effect may fail to identify the specification that captures the spatial dependence present in the data in the best possible way. In this paper, we suggest a modification of Anselin et al. (1996) by including the Durbin specification and attempt to select among the three sources of spatial dependence, namely, lag, error and Durbin, that should be included in the model. With the help of an extensive simulation study, we find that our suggested tests perform very well in finite samples, both in terms of size and power. Finally, we provide empirical analysis using real data sets to illustrate the usefulness of our suggested procedures for practical purposes.