A Latent Auto-Regressive Approach for Bayesian Structural Equation Modeling of Spatially or Socially Dependent Data

Spatial analytic approaches are classic models in econometric literature, but relatively new in social sciences. Spatial analysis models are synonymous with social network auto-regressive models which are also gaining popularity in the behavioral sciences. These models have two major benefits. First, dependent data, either socially or spatially, must be accounted for to acquire unbiased results. Second, analysis of the dependence provides rich additional information such as spillover effects. Structural Equation Models (SEM) are widely used in psychological research for measuring and testing multi-faceted constructs. So far, SEM that allow for spatial or social dependency are limited with regard to their flexibility, for example, when estimating nonlinear effects. Here, we provide a cohesive framework which can simultaneously estimate latent interaction/polynomial effects and account for spatial effects with both exogenous and endogenous latent variables, the Bayesian Spatial Auto-Regressive Structural Equation Model (BARDSEM). First, we briefly outline classic auto-regressive models. Next, we present the BARDSEM and introduce simulation results to exemplify its performance. Finally, we provide an empirical example using the spatially dependent extended US southern homicide data to show the rich interpretations that are possible using the BARDSEM. Finally, we discuss implications, limitations, and future research.