**Sample interview questions:** How do you address the presence of endogeneity in your spatial econometric models?

**Sample answer:**

**Use instrumental variables (IV) estimation.**IV estimation is a technique that can be used to estimate the causal effect of a variable on another variable in the presence of endogeneity. IV estimation works by finding a variable that is correlated with the endogenous variable but is not correlated with the error term. This variable is then used as an instrument to estimate the causal effect of the endogenous variable.**Use two-stage least squares (2SLS) estimation.**2SLS estimation is a variant of IV estimation that is commonly used in spatial econometrics. 2SLS estimation works by first estimating the reduced form equation, which is the equation that relates the endogenous variable to the exogenous variables and the error term. The predicted values from the reduced form equation are then used to estimate the structural equation, which is the equation that relates the endogenous variable to the exogenous variables and the error term.**Use a spatial lag model or a spatial error model.**Spatial lag models and spatial error models are two types of spatial econometric models that can be used to address the presence of endogeneity. Spatial lag models assume that the endogenous variable is affected by the values of th… Read full answer