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Regional convergence in the European Union (1985-1999). A spatial dynamic panel analysis

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  • Gabriele Tondl

    ()

  • Harald Badinger
  • Werner Müller

Abstract

We estimate the speed of income convergence for a sample of 196 European NUTS 2 regions over the period 1985-1999. So far there is no direct estimator available for dynamic panels with strong spatial dependencies. We propose a two-step procedure, which involves first spatial filtering of the variables to remove the spatial correlation, and application of standard GMM estimators for dynamic panels in a second step. Our results show that ignorance of the spatial correlation leads to potentially misleading results. Applying a system GMM estimator on the filtered variables, we obtain a speed of convergence of seven per cent.

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File URL: http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa03/cdrom/papers/455.pdf
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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa03p455.

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Date of creation: Aug 2003
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Handle: RePEc:wiw:wiwrsa:ersa03p455

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