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We consider treatment effect estimation via a difference-in-difference approach for data with local spatial interaction such that the outcome of observed units depends on their own treatment as well as on the treatment status of proximate neighbors. We show that under standard assumptions...
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, referring to both heterogeneity and interdependence of phenomena occurring in two-dimensional space. Spatial autocorrelation or …
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autocorrelation among the regression disturbances. In particular, the true size of the test tends to either zero or unity when the … spatial autocorrelation coefficient approaches the boundary of the parameter space. …
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