Measuring the effects of economic branches in local economic growth using panel data and time series analysis: a case study of the Greek regions

The objective of the paper is to examine the impact of economic branches on the growth of the Greek local economy using the economic base theory and relevant panel data and time series techniques. The paper applies yearly panel data from 1998 to 2017 and panel data models to analyse the multiplier effects of each economic branch in the overall local economy. Also, it implements quarterly data from the above period and time series models to picture the relationship between the local and export economic branches for each Greek region during the examined period. The paper applies the Spatial Panel Fixed Effects Lag Model and the Spatial Panel Fixed Effects Error Model as the suitable panel methods to depict the multiplier effects of each economic branch, next to the Pooled OLS and diagnostics checks for fixed effects and random effects results. In the time series analysis, the Johansen cointegration test results to a vector error correction model indicating the long-run relationship between export and local economic branches in some Greek regions. For the remaining regions, the Granger causality reveals the specific relationship in the short-run period. Education-health services and manufacturing present significant and higher multiplier effects on the overall local economy. A long-run relationship exists in the regions, where the basic primary sector as basic branches from the secondary sector show the most significant multiplier effects. On the other side, a short-run bi-directional causality appears in regions, where basic services picture the most significant effects in the local economy.