Modeling Spatial Data Pooled over Time: Schematic Representation and Monte Carlo Evidences

Abstract

The spatial autocorrelation issue is now well established, and it is almost impossible to deal with spatial data without considering this reality. In addition, recent developments have been devoted to developing methods that deal with spatial autocorrelation in panel data. However, little effort has been devoted to dealing with spatial data (cross-section) pooled over time. This paper endeavours to bridge the gap between the theoretical modeling development and the application based on spatial data pooled over time. The paper presents a schematic representation of how spatial links can be expressed, depending on the nature of the variable, when combining the spatial multidirectional relations and temporal unidirectional relations. After that, a Monte Carlo experiment is conducted to establish the impact of applying a usual spatial econometric model to spatial data pooled over time. The results suggest that neglecting the temporal dimension of the data generating process can introduce important biases on autoregressive parameters and thus result in the inaccurate measurement of the indirect and total spatial effect related to the spatial spillover effect.