At the Frontier Between Local and Global Interactions in Regional Sciences

Abstract

Regional economists are increasingly adopting spatial analytical and spatial econometric perspectives to study questions related to local versus global spatial spillover effects. Recent studies have shown that blindly adopting traditional spatial econometric models to measure those externalities might not be relevant. Explicitly accounting on how closely related groups of economic agents such as individuals or firms interact across space can be of great benefit for researchers working at the interface of social economics and geography. Recent development in economic theory has provided new ways to incorporate a range of spillover effects into a variety of economic models (Bramoullé et al., Am Econ Rev 104:898–930, 2014). The newly redefined concept of local spillover in the socio-economic literature involves a more complex interaction structure that includes feedback effects, resulting from impact passing through neighboring observations and coming back to the original location, as typically observed for global interaction models. However, the spatial magnitude of those local externalities is more limited across space.

Facing a massive increase of socio-economic information about individual and neighborhood characteristics, recent locational theories underline how peer interaction between individuals are shaping inter- and intra-regional equilibrium. The objective of this chapter is to stimulate a new interest on how to properly model and estimate the quantitative magnitude of spillovers using recent spatial econometric methods utilizing geographical information system tools.