This paper examines the significance of spatial externalities for youths’
school-to-training transitions in Germany. For this purpose, it is necessary to
address the methodological question of how an individual’s spatial context has
to be operationalized with respect to both its extent and the problem of
spatial autocorrelation. Our analyses show that the “zone of influence”
comprises of the whole of Germany, not only close-by districts, and that these
effects differ between structurally weak and strong regions. Consequently,
assuming that only close proximity affects individual outcomes may disregard
relevant contextual influences, and for spatial models that require an a priori
definition of the weights for spatial units, it may be erroneous to make a decision
based on this assumption. Concerning spatial autocorrelation, we found that
neglecting local spatial autocorrelation at the context level causes
considerable bias to the estimates, especially for districts that are close to
the home district.
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