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Conditional Beta- and Sigma-Convergence in Space: A Maximum Likelihood Approach

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Michael Pfaffermayr ()

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Abstract

Empirical work on regional growth under spatial spillovers uses two workhorse models: the spatial Solow model and Verdoorn's model. This paper contrasts these two views on regional growth processes and demonstrates that in a spatial setting the speed of convergence is heterogenous in both considered models, depending on the remoteness and the income gap of all regions. Furthermore, the paper introduces Wald tests for conditional spatial sigma-convergence based on a spatial maximum likelihood approach. Empirical estimates for 212 European regions covering the period 1980-2002 reveal a slow speed of convergence of about 0.7 percent per year under both models. However, pronounced heterogeneity in the convergence speed is evident. The Wald tests indicate significant conditional spatial sigma-convergence of about 2 percent per year under the spatial Solow model. Verdoorn's specification points to a smaller and insignificant variance reduction during the considered period.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2007-17.

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Length: 54
Date of creation: Aug 2007
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Handle: RePEc:inn:wpaper:2007-17

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Keywords: Conditional spatial Beta- and Sigma-convergence; Spatial Solow model; Verdoorn's model; Spatial maximum likelihood estimates; European regions;

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Find related papers by JEL classification:
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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References listed on IDEAS
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  1. Peter Egger & Michael Pfaffermayr, 2009. "On Testing Conditional Sigma - Convergence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(4), pages 453-473, 08. [Downloadable!] (restricted)
  2. Attfield, C. L. F. & Cannon, Edmund S. & Demery, D. & Duck, Nigel W., 2000. "Economic growth and geographic proximity," Economics Letters, Elsevier, vol. 68(1), pages 109-112, July. [Downloadable!] (restricted)
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    Other versions:
  4. Peter Egger & Michael Pfaffermayr, 2006. "Spatial convergence," Papers in Regional Science, Blackwell Publishing, vol. 85(2), pages 199-215, 06. [Downloadable!] (restricted)
  5. Nazrul Islam, 2003. "What have We Learnt from the Convergence Debate?," Journal of Economic Surveys, Blackwell Publishing, vol. 17(3), pages 309-362, 07. [Downloadable!] (restricted)
  6. Enrique López-Bazo & Esther Vayá & Manuel Artís, 2004. "Regional Externalities And Growth: Evidence From European Regions," Journal of Regional Science, Blackwell Publishing, vol. 44(1), pages 43-73. [Downloadable!] (restricted)
  7. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Sergio J. Rey & Boris Dev, 2004. "Sigma-convergence in the presence of spatial effects," Urban/Regional 0404008, EconWPA, revised 22 Apr 2004. [Downloadable!]
  9. Wodon, Quentin & Yitzhaki, Shlomo, 2006. "Convergence forward and backward?," Economics Letters, Elsevier, vol. 92(1), pages 47-51, July. [Downloadable!] (restricted)
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  13. Sergio J. Rey & Mark V. Janikas, 2005. "Regional convergence, inequality, and space," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 155-176, April. [Downloadable!] (restricted)
  14. Wolfgang Keller, 2002. "Geographic Localization of International Technology Diffusion," American Economic Review, American Economic Association, vol. 92(1), pages 120-142, March. [Downloadable!]
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  15. Cem Ertur & Wilfried Koch, 2005. "Growth, Technological Interdependence and Spatial Externalities - Theory and Evidence," ERSA conference papers ersa05p651, European Regional Science Association. [Downloadable!]
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  16. Martin Carree & Luuk Klomp, 1997. "Testing The Convergence Hypothesis: A Comment," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 683-686, November. [Downloadable!] (restricted)
  17. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September. [Downloadable!] (restricted)
  18. Conley, Timothy G & Ligon, Ethan, 2002. " Economic Distance and Cross-Country Spillovers," Journal of Economic Growth, Springer, vol. 7(2), pages 157-87, June. [Downloadable!] (restricted)
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Full references

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. Hashiguchi, Yoshihiro, 2009. "Bayesian Estimation of Spatial Externalities Using Regional Production Function: The Case of China and Japan," MPRA Paper 17902, University Library of Munich, Germany. [Downloadable!]
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