An Overview of Spatial Econometrics

TL;DR

This paper provides a clear overview of spatial econometrics, explaining key techniques like spatial weights, autocorrelation detection, and spatial autoregressive models for analyzing spatial data.

Contribution

It offers a concise, accessible introduction to fundamental spatial econometric methods, emphasizing their practical application and underlying principles.

Findings

Introduction of spatial weights matrix creation

Methods for detecting spatial autocorrelation

Components of spatial autoregressive models

Abstract

This paper offers an expository overview of the field of spatial econometrics. It first justifies the necessity of special statistical procedures for the analysis of spatial data and then proceeds to describe the fundamentals of these procedures. In particular, this paper covers three crucial techniques for building models with spatial data. First, we discuss how to create a spatial weights matrix based on the distances between each data point in a dataset. Next, we describe the conventional methods to formally detect spatial autocorrelation, both global and local. Finally, we outline the chief components of a spatial autoregressive model, noting the circumstances under which it would be appropriate to incorporate each component into a model. This paper seeks to offer a concise introduction to spatial econometrics that will be accessible to interested individuals with a background in statistics or econometrics.