Estimation of parameter in spatial probit regression model

Abstract

Probit model is a non linear model used to analyze a relationship between a dependent variable (response) and some independent variables where the response is dichotomy qualitative data in which the value is equal to 1 for expressing the presence of a characteristic and 0 for expressing the absence of a characteristic. A data modeling associated with region or area is usually called as spatial. In spatial data, there is a spatial correlation effect which refers to spatial autocorrelation. An estimation using Ordinary Least Square (OLS) can not be applied in this condition because of this spatial autocorrelation effect, and Maximum Likelihood Estimation (MLE) is used as the alternative. In qualitative data involving an aspect of connection between one region to another needs a special method which combines probit regression method and spatial aspect, i.e. spatial probit regression with SAR (Spatial Autoregressive) model.