In this paper, we demonstrate the econometric consequences of different specification and estimation choices in the analysis of spatially interdependent data and show how to calculate and present spatial effect estimates substantively. We consider four common estimators—nonspatial OLS, spatial OLS, spatial 2SLS, and spatial ML. We examine analytically the respective omitted-variable and simultaneity biases of nonspatial OLS and spatial OLS in the simplest case and then evaluate the performance of all four estimators in bias, efficiency, and SE accuracy terms under more realistic conditions using Monte Carlo experiments. We provide empirical illustration, showing how to calculate and present spatial effect estimates effectively, using data on European governments' active labor market expenditures. Our main conclusions are that spatial OLS, despite its simultaneity, performs acceptably under low-to-moderate interdependence strength and reasonable sample dimensions. Spatial 2SLS or spatial ML may be advised for other conditions, but, unless interdependence is truly absent or minuscule, any of the spatial estimators unambiguously, and often dramatically, dominates on all three criteria the nonspatial OLS commonly used currently in empirical work in political science.
According to the embedded liberalism thesis, governments committed to
free trade provide insurance and other transfers to compensate those who
lose economically from expanded trade. The goal of this spending is to
maintain public support for trade liberalization. We provide a micro-level
test of the critical assumption behind the embedded liberalism thesis that
government programs designed to protect individuals harmed by imports
reduce opposition to free trade. Our micro results have important
implications for the macro relationship between trade and government
spending, which we also test. We find empirical support for the embedded
liberalism thesis in both our micro- and macro-level analyses.Earlier versions of this article were presented
at the Midwest Political Science Association's 2002 Meeting and at
the University of Illinois during summer 2003. We thank the respective
panel and seminar participants for their feedback. In addition, we want to
acknowledge valuable comments from William Bernhard, Rebecca Blank, Kerwin
Charles, Alan Deardorff, John DiNardo, John Freeman, Brian Gaines, Jim
Granato, Nathan Jensen, William Keech, Layna Mosley, Robert Pahre, Ken
Scheve, Marina Whitman, two anonymous reviewers, and Lisa Martin. They, of
course, are not responsible for any errors.
This article contributes to the growing literature on the role that domestic political institutions play in mediating globalization pressures by arguing that the capital tax constraints arising from international economic integration are the most severe for countries with majoritarian political institutions. In doing so, the author solves a tax puzzle that challenges conventional thinking about how institutions condition the relationship between economic globalization and domestic politics. He presents a formal, game-theoretic model to sharpen the basic logic of his argument and then tests some of the model's predictions empirically using both quantitative and qualitative evidence.
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