PROBIT WITH SPATIAL AUTOCORRELATION

ABSTRACT. Commonly-employed spatial autocorrelation models imply heteroskedastic errors, but heteroskedasticity causes probit to be inconsistent. This paper proposes and illustrates the use of two categories of estimators for probit models with spatial autocorrelation. One category is based on the EM algorithm, and requires repeated application of a maximum-likelihood estimator. The other category, which can be applied to models derived using the spatial expansion method, only requires weighted least squares.