Selecting the Interaction Matrix. Some Useful Criteria

  1. Jesús Mur
  2. Manuel Ruiz Marín 1
  3. Marcos Herrera
  1. 1 Universidad Politécnica de Cartagena

    Universidad Politécnica de Cartagena

    Cartagena, España


Seminario; 7th Jean Paelinck Seminar; 2014

Year of publication: 2014

Congress: VII Jean Paelinck Seminar. JP7-2014.

Type: Conference paper


In spatial econometrics, it is customary to specify a weighting matrix, the so-called W matrix, by choosing one matrix from a finite set of matrices. The decision is extremely important because, if the W matrix is misspecified, the estimates are likely to be biased and inconsistent. However, the procedure to select W is not well defined and, usually, it reflects the judgments of the user. In this paper, we revise the literature looking for criteria to help with this problem. Also, a new nonparametric procedure is introduced. Our proposal is based on a measure of the information, minimum conditional entropy, MW. We compare these alternatives by means of a Monte Carlo experiment