Alternative perspectives on spatial econometrics model specification search

The search for the most appropriate spatial econometric specification has received considerable attention in the literature. A major tension exists between a specific to general approach (STGE), and a general to specific approach (GETS). This paper addresses several aspects that have received less (or no) attention in the literature to date: the application of instrumental variables/generalised methods of moments (IV-GMM)-based methods rather than the maximum likelihood estimation characteristic of the literature so far, and the consideration of several new search strategies. These strategies are evaluated in an extensive set of simulation experiments. Some recommendations for empirical practice are formulated.