Hello,

is there a way to estimate a sar model (> lagsarlm) with a dummy variable in
order to discriminate into two spatial regimes and obtain two different
coefficients' estimations for each variable? So far I've been constructing
two new variables from each original one by multiplicating it by each dummy,
that is: GPC*D1 and GDP*D2. After that I've been running a regression by
using the two new variables as explanatory v.
Since the two dummies are perfecly complementary, I guess there might be a
problem of multicollinearity in this way of estimating the model. Is there
an option like the "subset" one in the "lm" function which I can use in a
SAR model? Or otherwise, how would you estimate a SAR model with two spatial
regimes in R?

Thank you
Annachiara Saguatti

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