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Regional Convergence in the European Union (1985-1999): A Spatial Dynamic Panel Analysis

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Author Info
Badinger, Harald
Muller, Werner G.
Tondl, Gabriele

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Abstract

We estimate the speed of income convergence for a sample of 196 European NUTS 2 regions over the period 1985-1999. So far there is no direct estimator available for dynamic panels with strong spatial dependencies. We propose a two-step procedure, which involves first spatial filtering of the variables to remove the spatial correlation, and application of standard GMM estimators for dynamic panels in a second step. Our results show that ignorance of the spatial correlation leads to potentially misleading results. Applying a system GMM estimator on the filtered variables, we obtain a speed of convergence of 6.9 per cent and a capital elasticity of 0.43.

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Publisher Info
Paper provided by Hamburg Institute of International Economics in its series Discussion Paper Series with number 26329.

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Date of creation: 2002
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Handle: RePEc:ags:hiiedp:26329

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Keywords: growth; convergence; spatial dependence; spatial filtering; dynamic panels; GMM; Community/Rural/Urban Development; C23; O00; R11;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hans-Friedrich Eckey & Matthias Türck, 2006. "Convergence of EU-Regions. A Literature Report," Discussion Papers in Economics 80/06, University of Kassel, Institute of Economics. [Downloadable!]
  2. Shankar, Raja & Shah, Anwar, 2009. "Lessons from European Union policies for regional development," Policy Research Working Paper Series 4977, The World Bank. [Downloadable!]
  3. Jonathan Jones & Colin Wren, 2008. "FDI Location Across British Regions and Inward Investment Policy," SERC Discussion Papers 0013, Spatial Economics Research Centre, LSE. [Downloadable!]
  4. Paul Raschky, 2007. "Estimating the effects of risk transfer mechanisms against floods in Europe and U.S.A.: A dynamic panel approach," Working Papers 2007-05, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
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