Spatial effects in econometric practice in environmental and resource economics

In this article, I consider a few selected conceptual and practical aspects encountered in the use of spatial econometric methods in environmental and resource economics. Rather than reporting on a single application, I will review issues that surfaced in a number of recent and ongoing studies in which an explicit spatial econometric perspective was taken, dealing with both the valuation of air quality improvements (Kim, Phipps and Anselin; Anselin, Murdoch and Thayer) as well as the socio-economic factors behind Amazon deforestation (Wood et al., Anselin et al., (1999); Walker, Moran and Anselin). Due to space constraints, I will limit the discussion to cross-sectional models (excluding space-time interaction) and will focus in particular on four selected issues pertaining to the aspects of spatial data and the specification of spatial effects in econometric models. These are addressed in the next two sections. I close with some comments on future directions and research needs.