Incorporating Spatial Structures in Ecological Inference: An Information Theory Approach

Abstract: This paper introduces an Information Theory-based method for modeling economic aggregates and estimating their sub-group (sub-area) decomposition when no individual or sub-group data are available. This method offers a flexible framework for modeling the underlying variation in sub-group indicators, by addressing the spatial dependency problem. A basic ecological inference problem, which allows for spatial heterogeneity and dependence, is presented with the aim of first estimating the model at the aggregate level, and then of employing the estimated coefficients to obtain the sub-group level indicators.