Bayesian Model Averaging for Spatial Econometric Models

38 Pages Posted: 17 Aug 2006

See all articles by James P. LeSage

James P. LeSage

Texas State University - McCoy College of Business Administration

Olivier Parent

University of Cincinnati - Department of Economics

Date Written: August 16, 2006

Abstract

We extend the literature on Bayesian model comparison for ordinary least-squares regression models to include spatial autoregressive and spatial error models. Our focus is on comparing models that consist of different matrices of explanatory variables. A Markov Chain Monte Carlo model composition methodology labelled MC to the third by Madigan and York (1995) is developed for two types of spatial econometric models that are frequently used in the literature. The methodology deals with cases where the number of possible models based on different combinations of candidate explanatory variables is large enough that calculation of posterior probabilities for all models is difficult or infeasible. Estimates and inferences are produced by averaging over models using the posterior model probabilities as weights, a procedure known as Bayesian model averaging. We illustrate the methods using a spatial econometric model of origin-destination population migration flows between the 48 US States and District of Columbia during the 1990 to 2000 period.

Keywords: spatial estimation of migration flows, posterior model probabilities, log-marginal likelihood, reversible jump MCMC

JEL Classification: C11, R11, R12

Suggested Citation

LeSage, James P. and Parent, Olivier, Bayesian Model Averaging for Spatial Econometric Models (August 16, 2006). Available at SSRN: https://ssrn.com/abstract=924608 or http://dx.doi.org/10.2139/ssrn.924608

James P. LeSage (Contact Author)

Texas State University - McCoy College of Business Administration ( email )

Finanace and Economics Department
601 University Drive
San Marcos, TX 78666
United States
512-245-0256 (Phone)
512-245-3089 (Fax)

HOME PAGE: http://www.spatial-econometrics.com

Olivier Parent

University of Cincinnati - Department of Economics ( email )

Carl H. Lindner Hall 2925 Campus Green Drive
PO Box 0371
Cincinnati, OH 45221-0211
United States

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