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Divergence – Is it Geography?

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  • Thomas Straubhaar

    (HWWA and CEPR)

  • Marc Suhrcke

    (HWWA and UNICEF)

  • Dieter Urban

    (LdA and HWWA)

Abstract

This paper tests directly a geography and growth model using regional data for Europe, the US, and Japan during di®erent time periods. We set up a standard geography and growth model with a poverty trap and derive a log- linearized growth equation that corresponds directly to a threshold regression technique in econometrics. In particular, we test whether regions with high population density (centers) grow faster and have a permanently higher per capita income than regions with low population density (peripheries). We find geography driven divergence for US states and European regions after 1980. Population density is superior in explaining divergence to initial income which the most important o±cial EU eligibility criterium for regional aid is built on. Divergence is stronger on smaller regional units (NUTS3) than on larger ones (NUTS2). Thus, the wavelength of agglomeration forces seems to be rather small in Europe. Human capital and R&D are transmission channels of divergence processes. Human capital based poverty trap models are an alternative explanation for regional poverty traps.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 158.

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Date of creation: 01 Nov 2002
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Handle: RePEc:csl:devewp:158

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Keywords: Keywords: threshold estimation; economic geography; regional income convergence; poverty trap; regime shifts; bootstrap;

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Cited by:
  1. Giovanni Peri & Dieter Urban, 2002. "The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany," Development Working Papers, Centro Studi Luca d\'Agliano, University of Milano 164, Centro Studi Luca d\'Agliano, University of Milano.
  2. Fabiano COMPAGNUCCI & Augusto CUSINATO, 2011. "Industrial Districts and the City: Relationships in the Knowledge Age. Evidence from the Italian Case," Working Papers, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali 365, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  3. Annekatrin Niebuhr & Silvia Stiller, 2003. "Territorial disparities in Europe," Intereconomics: Review of European Economic Policy, Springer, Springer, vol. 38(3), pages 156-164, May.

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