Modelling and diagnostics of spatially autocorrelated counts

Abstract

This paper proposes a new spatial lag regression model which addresses global spatial autocorrelation arising from cross-sectional dependence between counts. Our approach offers an intuitive interpretation of the spatial correlation parameter as a measurement of the impact of neighbouring observations on the conditional expectation of the counts. It allows for flexible likelihood-based inference based on different distributional assumptions using standard numerical procedures. In addition, we advocate the use of data-coherent diagnostic tools in spatial count regression models. The application revisits a data set on the location choice of single unit start-up firms in the manufacturing industry in the US.