SARAR model: interpretation

[Dario Maimone Ansaldo Patti]

Dear All,

I estimate a model like the following spatial model (SARAR):

y=rho*Wy+beta*X+u
u=psi*u+eta

where W is a spatial distance matrix, X is a set of covariates and u is the error term.

The parameter rho is positive and significant, while the parameter psi is negative and significant. I know that the interpretation of coefficients needs caution (I use estat impact for that). As far as the spatial coefficients are concerned, the positive rho parameter in my view is an evidence of a positive spillover from an observation to the other, but I have not a clear idea about the interpretation of the psi parameter. Does it mean that observations with an high y are close to observations with a low y? I am not entirely convinced about this interpretation. Any suggestion?

Thanks in advance.

Dario

[Phil Bromiley]

You'll increase your chances of a useful answer by following the FAQ on asking questions - provide Stata code in code delimiters, readable Stata output, and sample data using dataex. You don't even specify exactly package and code you estimate.

Getting an answer depends on someone active using the estimator you're discussing. It is quite possible that none of the active folks use SARAR. You may need to contact the program's author.