Selecting the Interaction Matrix. Some Useful Criteria
- Jesús Mur
- Manuel Ruiz Marín 1
- Marcos Herrera
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1
Universidad Politécnica de Cartagena
info
Year of publication: 2014
Congress: VII Jean Paelinck Seminar. JP7-2014.
Type: Conference paper
Abstract
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