| Magazines |
Volume 77, July 2019, Pages 38-74 |
| Author | Jianan Li, Xiaoyi Han |
| Content | In this paper we consider a generalized spatial durbin error model with spatial spillovers that are flexible and
subject to abrupt change arising from zero spillover effects. We propose a new class of Bayesian lasso-type
prior, the Bayesian elastic net with smoothness prior, to both tackle the multicollinearity among spatial lags
of explanatory variables and capture both zero and nonzero spillover effects. We develop a computationally
tractable Markov Chain Monte Carlo (MCMC) algorithm to estimate the model under the new prior. We also
study the corresponding model selection issue among the generalized spatial durbin error model and its two
special cases: 1) the spatial error model and 2) the spatial autoregressive type model. Simulation results suggest
that the new prior can outperform many existing Bayesian priors in terms of in-sample predictive performance.
We apply the model with the new prior to investigate the influence and spillover effects of China’s historical
treaty ports in the 19th century on prefectures’ population and economic growth in the long-run. We find that
prefectures with treaty ports tend to grow faster in terms of population size and GDP level. We also detect
positive and significant spillovers when one’s neighbors become treaty ports. |
| JEL-Codes | |
| Keywords | Generalized spatial durbin error model; Bayesian elastic net with smoothness prior; Bayesian estimation; Spillover; Historical treaty port |
