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Analysing Growth and Distribution Dynamics - Isolating Divergence Factors

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  • Paul Cheshire

    ()

  • Stefano Magrini

    ()

Abstract

This paper analyses the factors driving convergence and divergence processes in the growth dynamics of European urban regions over the period 1978 to 1994. To achieve this, we develop a two-stage procedure. First, viewing growth of real GDP per capita as a multivariate process, a fully specified growth model is estimated assessing growth dynamics and the role of a rich set of variables. In particular, as noted elsewhere (Cheshire and Magrini, 2005), evidence is found which is supportive of a spatial adaptation of the endogenous growth model, with human capital related variables having a highly significant role in explaining growth differences. The second stage then uses a ‘distribution dynamics’ approach to evaluate the contribution of individual growth factors to convergence dynamics. More specifically, regression results are used to simulate alternative end period incomes which, via the estimation of stochastic kernels, enable us to isolate the role of selected variables in shaping the dynamics of the cross-sectional distribution of per capita income. This analysis suggests that the most important factor determining the form of FUR growth and convergence dynamics observed from 1978 to 1994 was the differing distribution of human capital. These results are compared with the results using the Markov Chain approach and it is found both techniques lead to similar conclusions.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p749.

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Date of creation: Aug 2005
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Handle: RePEc:wiw:wiwrsa:ersa05p749

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  1. Quah, Danny, 1994. "One Business Cycle and One Trend from (Many) Many Disaggregates," CEPR Discussion Papers 873, C.E.P.R. Discussion Papers.
  2. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  3. repec:fth:stanho:e-95-4 is not listed on IDEAS
  4. Magrini, Stefano, 1999. "The evolution of income disparities among the regions of the European Union," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 257-281, March.
  5. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
  6. Bulli, Sandra, 2001. "Distribution Dynamics and Cross-Country Convergence: A New Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 226-43, May.
  7. Sala-i-Martin, Xavier, 1994. "Regional Cohesion: Evidence and Theories of Regional Growth and Convergence," CEPR Discussion Papers 1075, C.E.P.R. Discussion Papers.
  8. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  9. Glaeser, E.L. & Scheinkman, J.A., 1993. "Economic Growth in a Cross-Section of Cities," Harvard Institute of Economic Research Working Papers 1645, Harvard - Institute of Economic Research.
  10. Paul Cheshire & Stefano Magrini, 2005. "Population Growth in European Cities: weather matters – but only nationally," Urban/Regional 0506009, EconWPA.
  11. Quah, Danny, 1993. "Empirical cross-section dynamics in economic growth," European Economic Review, Elsevier, vol. 37(2-3), pages 426-434, April.
  12. Paul Cheshire & Stefano Magrini, 2005. "European Urban Growth - throwing some Economic Light into the Black Box," ERSA conference papers ersa05p13, European Regional Science Association.
  13. Paul Cheshire, 2000. "Endogenous Processes in European Regional Growth: Convergence and Policy," Growth and Change, Gatton College of Business and Economics, University of Kentucky, vol. 31(4), pages 455-479.
  14. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
  15. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
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Cited by:
  1. Toni Mora, 2008. "Factors conditioning the formation of European regional convergence clubs," The Annals of Regional Science, Springer, vol. 42(4), pages 911-927, December.

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