Pan-European Regional Income Growth and Club-Convergence - Insights from a Spatial Econometric Perspective
AbstractClub-convergence analysis provides a more realistic and detailed picture about regional income growth than traditional convergence analysis. This paper presents a spatial econometric framework for club-convergence testing that relates the concept of club-convergence to the notion of spatial heterogeneity. The study provides evidence for the club-convergence hypothesis in cross-regional growth dynamics from a pan-European perspective. The conclusions are threefold. First, we reject the standard Barro-style regression model which underlies most empirical work on regional income convergence, in favour of a two regime [club] alternative in which different regional economies obey different linear regressions when grouped by means of Getis and Ord's (1992) local clustering technique. Second, the results point to a heterogeneous pattern in the pan-European convergence process. Heterogeneity appears in both the convergence rate and the steady-state level. But, third, the study also reveals that spatial error dependence introduces an important bias in our perception of the club-convergence and shows that neglection of this bias would give rise to misleading conclusions.
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Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p6.
Date of creation: Aug 2005
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-05 (All new papers)
- NEP-EEC-2006-02-05 (European Economics)
- NEP-GEO-2006-02-05 (Economic Geography)
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