Local and global spatial effects in hierarchical models

Hierarchical models have a long history in empirical applications; recognition of the fact that many datasets of interest to applied econometricians are nested; counties within states, pupils within school, regions within countries, etc. Just as many datasets are characterized by nesting, many are also characterized by the presence of spatial dependence or spatial heterogeneity. Significant advances have been made in developing econometric techniques and models to allow applied econometricians to address this spatial dimension to their data. This paper fuses these two literatures together and combines a hierarchical model with the two general spatial econometric models.