Model Validation in Spatial Econometrics: A Review and Evaluation of Alternative Approaches

Formal approaches to assess the validity of spatial theoretical constructs are reviewed and evaluated with respect to their application and potential in spatial econometrics. A distinction is made between specification tests and model selection procedures. For the first, particular emphasis is on tests for residual spatial autocorrelation, tests on common factors, and tests on non-nested hypotheses. For the second, attention is focused on information-theoretic criteria, Bayesian approaches, and heuristic procedures. Also, some thoughts are presented on model validation as a multiobjective decision problem and its relevance in planning and policy analysis.