Spatial Effects in Dyadic Data

Political units often spatially depend in their policy choices on other units. This also holds in dyadic settings where, as in much of international relations research, the focus of the analysis is the pair or dyad of two political units. Yet, with few exceptions, social scientists have analyzed contagion only in monadic datasets, consisting of individual political units. This article categorizes all possible forms of modeling spatial lags in both undirected and directed dyadic data. This enables scholars to formulate and test novel mechanisms of contagion, thus ideally paving the way for studies analyzing spatial dependence between dyads of political units. We illustrate the modeling flexibility gained from an understanding of the full set of specification options for spatial effects in dyadic data by an application to the diffusion of bilateral investment treaties between developed and developing countries, building and extending on Elkins et al. (2006, Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960 2000. International Organization 60: 811-846). We come to different conclusions about the channels through which bilateral investment treaties diffuse. We find that rather than a capital importing country being influenced by the total number of BITs signed by other capital importers, as modeled in the original article, a capital importing country is only more likely to sign a BIT with a capital exporter if other competing capital importers have signed BITs with this very same capital exporter. Similarly, other capital exporters' BITs with a specific capital importer influence an exporter's incentive to agree on a BIT with the very same capital importer