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Spatial Convergence of Regions Revisited: A Spatial Maximum Likelihood Systems Approach

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  • Michael Paffermayr

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    Abstract

    This paper suggests that one should account for the endogeneity of important explanatory variables and the persistence of technology shocks when analyzing spatial convergence among regions.Specifically, it is argued that a systems approach is called for that includes the average growth rate and the initial income level as the endogenous variables. For 212 European regions the estimation results reveal a substantial correlation between the disturbances of the equation explaining initial income per capita and that of its subsequent average growth rate. Moreover, the estimated speed of convergence is found substantially higher in a systems framework. This holds true for both spatial conditional and unconditional convergence.

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    File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2009-07.pdf
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    Bibliographic Info

    Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-07.

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    Length: 37
    Date of creation: Mar 2009
    Date of revision:
    Handle: RePEc:inn:wpaper:2009-07

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    Keywords: Spatial beta-convergence; Spatial Solow model; Spatial systems maximum likelihood estimation; Europeanregions;

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    1. Barro, Robert J. & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1994. "Capital Mobility in Neoclassical Models of Growth," CEPR Discussion Papers 1019, C.E.P.R. Discussion Papers.
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    3. ERTUR, Cem & KOCH, Wilfried, 2005. "Growth, Technological Interdependence and Spatial Externalities: Theory and Evidence," LEG - Document de travail - Economie 2005-03, LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne.
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    11. Fields, Gary S, 1979. "Place-to-Place Migration: Some New Evidence," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 21-32, February.
    12. Faini, Riccardo, 1996. "Increasing returns, migrations and convergence," Journal of Development Economics, Elsevier, vol. 49(1), pages 121-136, April.
    13. 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.
    14. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
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