TRANSITIONS AT DIFFERENT MOMENTS IN TIME: A SPATIAL PROBIT APPROACH

This paper adopts a spatial probit approach to explain interaction effects among cross-sectional units when the dependent variable takes the form of a binary response variable and transitions from state 0 to 1 occur at different moments in time. The model has two spatially lagged variables: one for...

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Bibliographic Details
Published in:Journal of applied econometrics (Chichester, England) England), 2017-03, Vol.32 (2), p.422-439
Main Authors: ELHORST, J.PAUL, HEIJNEN, PIM, SAMARINA, ANNA, JACOBS, JAN P. A. M.
Format: Article
Language:English
Subjects:
Econometrics
Spatial analysis
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Summary:This paper adopts a spatial probit approach to explain interaction effects among cross-sectional units when the dependent variable takes the form of a binary response variable and transitions from state 0 to 1 occur at different moments in time. The model has two spatially lagged variables: one for units that are still in state 0 and one for units that had already transferred to state 1. The parameters are estimated on observations for those units that are still in state 0 at the start of the different time periods, whereas observations on units after they transferred to state 1 are discarded, just as in the literature on duration modeling. Furthermore, neighboring units that had not yet transferred may have a different impact from units that had already transferred. We illustrate our approach with an empirical study of the adoption of inflation targeting for a sample of 58 countries over the period 1985–2008.
ISSN:0883-7252
1099-1255
DOI:10.1002/jae.2505