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International Regional Science Review
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Spatial Autocorrelation Or Model Misspecification?

Daniel P. McMillen

Department of Economics (MC 144), University of Illinois at Chicago, Chicago, IL

A Monte Carlo experiment illustrates one of the pitfalls of spatial modeling. Specification tests indicate spatial autocorrelation when functional form misspecification is actually the only problem with the model. Incorrect functional forms and omitted variables that are correlated over space produce spurious spatial autocorrelation.

Key Words: spatial autocorrelation • Lagrange multiplier (LM) tests • nonparametric • kernel regression

International Regional Science Review, Vol. 26, No. 2, 208-217 (2003)
DOI: 10.1177/0160017602250977
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[Abstract] [PDF]