Spatial fixed effects and spatial dependence in a single cross-section

Luc Anselin, Daniel Arribas-Bel

Research output: Contribution to journalArticle

48 Scopus citations

Abstract

We investigate the common conjecture in applied econometric work that the inclusion of spatial fixed effects in a regression specification for a single cross-sectional data set removes spatial dependence. We demonstrate analytically and by means of a series of simulation experiments how evidence of the removal of spatial autocorrelation by spatial fixed effects may be spurious when the true data generating processes (DGP) takes the form of a spatial lag or spatial error dependence. In addition, we also show that spatial fixed effects correctly remove spatial correlation only in the special case where the dependence is group-wise, with all observations in the same group as neighbours of each other.

Original languageEnglish (US)
Pages (from-to)3-17
Number of pages15
JournalPapers in Regional Science
Volume92
Issue number1
DOIs
StatePublished - Mar 1 2013

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Keywords

  • Spatial autocorrelation
  • Spatial econometrics
  • Spatial externalities
  • Spatial fixed effects
  • Spatial interaction
  • Spatial weights

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Environmental Science (miscellaneous)

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