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A Simultaneous Spatial Panel Data Model of Regional Growth Variation: An Empirical Analysis of Employment, Income, Migration and Local Public Services

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Author Info

  • Gebremeskel H. Gebremariam
  • Tesfa G. Gebremedhin
  • Peter V. Schaeffer
  • Randall W. Jackson

Abstract

In this paper we develop a spatial panel simultaneous-equations model of employment growth, migration behavior, local public services and median household income in a partial lag-adjustment growth-equilibrium framework and utilizing a one-way error component model for the disturbances. To estimate the model, we developed a five-step new estimation strategy by generalizing the Generalized Spatial Three-Stage Least Squares (GS3SLS) approach outlined in Kelejian and Prucha (2004) into a panel data setting. The empirical implementation of the model uses county-level data from the 418 Appalachian counties for 1980-2000. The estimates show the existence of feedback simultaneities among the endogenous variables of the model, the existence of conditional convergence with respect to the respective endogenous variable of each equation of the model, and the existence of spatial autoregressive lag effects and spatial cross-regressive lag effects with respect to the endogenous variables of the model. Moreover, the speed of adjustment parameters is generally comparable to those in literature. One of the key conclusions is that sector-specific policies should be integrated and harmonized in order to give the desirable outcome. In addition, regionally focusing resources for development policy may yield greater returns than treating all locations the same.

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File URL: ftp://repec.econ.vt.edu/Papers/Gebre/AAEA_Panel_Revised_Gebre_10_27_08.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by Virginia Polytechnic Institute and State University, Department of Economics in its series Working Papers with number e07-12.

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Length: 37 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:vpi:wpaper:e07-12

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Keywords: Simultaneous spatial panel data model; Regional growth variation; Spatial autoregressive and cross-regressive lags; FGS3SLS;

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References

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  1. Baltagi, Badi H. & Song, Seuck Heun & Koh, Won, 2003. "Testing panel data regression models with spatial error correlation," Journal of Econometrics, Elsevier, vol. 117(1), pages 123-150, November.
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  11. Rupasingha, Anil & Goetz, Stephan J. & Freshwater, David, 2006. "The production of social capital in US counties," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(1), pages 83-101, February.
  12. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
  13. Steven C. Deller & Tsung-Hsiu (Sue) Tsai & David W. Marcouiller & Donald B.K. English, 2001. "The Role of Amenities and Quality of Life In Rural Economic Growth," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(2), pages 352-365.
  14. Kelly D. Edmiston, 2004. "The Net Effects of Large Plant Locations and Expansions on County Employment," Journal of Regional Science, Wiley Blackwell, vol. 44(2), pages 289-320.
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Cited by:
  1. Jeanty, P. Wilner & Ulimwengu, John Mususa, 2011. "Poverty rate and government income transfers: A spatial simultaneous equations approach," IFPRI discussion papers 1076, International Food Policy Research Institute (IFPRI).

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