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A two-step approach to account for unobserved spatial heterogeneity

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  • Anna Gloria Billé
  • Roberto Benedetti
  • Paolo Postiglione

Abstract

A two-step approach to account for unobserved spatial heterogeneity. Spatial Economic Analysis. Empirical analysis in economics often faces the difficulty that the data are correlated and heterogeneous in some unknown form. Spatial econometric models have been widely used to account for dependence structures, but the problem of directly dealing with unobserved spatial heterogeneity has been largely unexplored. The problem can be serious particularly if we have no prior information justified by economic theory. In this paper we propose a two-step procedure to identify endogenously spatial regimes in the first step and to account for spatial dependence in the second step. This procedure is applied to hedonic house price analysis.

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  • Anna Gloria Billé & Roberto Benedetti & Paolo Postiglione, 2017. "A two-step approach to account for unobserved spatial heterogeneity," Spatial Economic Analysis, Taylor & Francis Journals, vol. 12(4), pages 452-471, October.
    • Handle: RePEc:taf:specan:v:12:y:2017:i:4:p:452-471
    DOI: 10.1080/17421772.2017.1286373
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    6. Richard H. Rijnks & Stephen Sheppard, 2018. "Occupant Well-Being and House Values," Department of Economics Working Papers 2018-05, Department of Economics, Williams College.
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