The importance of modeling spatial spillovers in public choice analysis
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It is frequently assumed that regional observations on local government behavior, voters, regional taxes, etc. can be analyzed using ordinary least-squares (OLS) methods. We discuss spatial regression models in empirical studies of public choice issues using impacts arising from population migration on the provision of county-level government services as an illustration. Spatial regressions allow an examination of the direct and indirect (spatial spillover) effects which taken together determine the total impact (on the dependent variable) arising from a change in the explanatory variables. This decomposition should be quite useful in empirical public choice studies.
KeywordsSpatial dependence Spatial regression models Spatial spillovers
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