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Public school consolidation: a partial observability spatial bivariate probit approach
Author(s) -
Brasington David M.,
Parent Olivier
Publication year - 2017
Publication title -
journal of the royal statistical society: series a (statistics in society)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.103
H-Index - 84
eISSN - 1467-985X
pISSN - 0964-1998
DOI - 10.1111/rssa.12212
Subject(s) - observability , consolidation (business) , spillover effect , voting , multivariate probit model , bivariate analysis , estimation , econometrics , spatial econometrics , strategic complements , unobservable , economics , public economics , microeconomics , political science , mathematics , statistics , accounting , management , politics , law
Summary A pair of municipalities may consolidate services if they are contiguous. Traditional estimation methods assume that each voting process is independent. Instead we propose a new estimation procedure that allows the probability of consolidation to be influenced by neighbouring decisions. We extend a model of local interaction by allowing consolidation effort of neighbours to be either strategic substitutes or strategic complements. We disentangle direct effects arising from a change in one's own characteristics from indirect or spillover effects associated with a change in the other municipalities’ characteristics. Results reveal that the endogenous peer effect coming from neighbours is a primary determinant of willingness to consolidate.