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This paper applies spatial econometrics in relation to hedonic house price modeling. Some basic spatial model alternatives are used for a battery of relevant tests. Geographically-weighted regression, semiparametric analysis, and the mixed spatial Durbin model are also applied. The purpose is to detect missing spatial variables, misspecified functional form, and spatial heterogeneity in estimated parameters. Such misspecifications have been shown to give spurious results in relation to some frequently used directional based tests. Significant model improvement is achieved, so the paper should be of general interest as an example of practical econometric modeling within the field.
Liv Osland (Fri,) studied this question.