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Divergence. Is it Geography?

Author

Listed:
  • 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 different 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 official 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.

Suggested Citation

  • Thomas Straubhaar & Marc Suhrcke & Dieter Urban, 2002. "Divergence. Is it Geography?," Development Working Papers 158, Centro Studi Luca d'Agliano, University of Milano.
    • Handle: RePEc:csl:devewp:158
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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 164, Centro Studi Luca d'Agliano, University of Milano.
    2. Giovanni Peri & Dieter Urban, 2002. "The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany," Development Working Papers 164, Centro Studi Luca d'Agliano, University of Milano.
    3. Afonso, António & Jalles, João Tovar, 2013. "Growth and productivity: The role of government debt," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 384-407.
    4. Augusto Cusinato & Fabiano Compagnucci, 2011. "Industrial Districts and the City: Relationships in the Knowledge Age. Evidence from the Italian Case," ERSA conference papers ersa11p237, European Regional Science Association.
    5. Annekatrin Niebuhr & Silvia Stiller, 2003. "Territorial disparities in Europe," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 38(3), pages 156-164, May.

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    More about this item

    Keywords

    Keywords: threshold estimation; economic geography; regional income convergence; poverty trap; regime shifts; bootstrap;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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