Grid and shake: Spatial aggregation and robustness of regionally estimated elasticities

This paper proposes a simple and transparent method for measuring spatial robustness of regionally estimated coefficients and considers the role of the administrative districts and of the size of regions. The procedure offers a new solution for a practical empirical issue: comparing the variables of interest across spatially aggregated units. It improves upon existing methods, especially when spatial units are heterogeneous. To illustrate the method, we use Hungarian data and compare estimates of agglomeration externalities at various levels of aggregation. Using the procedure, we find that the method of spatial aggregation seems to be of equal importance to the specification of the econometric model.