Intraregional Flow Problem in Spatial Econometric Model for Origin-destination Flows

The gravity model is used in a variety of fields to explain spatial interaction behavior such as transportation, commodity, or migration flows, but the model assumes observed flows to be independent and thus affected by spatial autocorrelation. Recent studies succeeded in modeling origin-destination (OD) flows in a spatial econometric field, implying that considering spatial dependence among flows will improve the accuracy of the model. However, not all origin-destination flow data contains intraregional flows, and no research has been conducted on how to cope with such data. This study focuses on the problem wherein the spatial econometric model for flows proposed by LeSage and Pace (2008) is not feasible when the flow data does not have intraregional flows. The study also proposes the EM algorithm as a method to overcome this problem.