The Scan-LM to Test Instability in the Constant Coefficient of Spatial Autoregressive Models

Abstract

This paper presents a test based on the principle of Lagrange Multipliers to identify spatial instability in the constant coefficient of regression models including substantive spatial dependence. The test has been adapted to the Scan methodology. Its main advantage is that it identifies areas with differential behavior without the need to provide information about their location, shape, or size. The study shows the utility of the test, reconsidering the results obtained by Mur et al.(2008) about instability in the distribution of per capita income in European regions.

Keywords

• Parametric instability
• Hypothesis test
• Lagrange Multipliers
• Scan methodology
• Spatial autocorrelation