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How internally mobile is capital?

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  • Michael Beenstock

    (Hebrew University of Jerusalem)

Abstract

If capital is perfectly mobile between regions within countries, and regional TFPs share a common stochastic trend, the ratio of regional capital–labor ratios should remain constant over time. Spatial panel data on regional capital–labor ratios in Israel are used to test this hypothesis. Since the data are nonstationary, pairwise panel cointegration tests are applied. These tests are complicated by cross-section dependence between the spatial panel units. Although the null hypothesis of perfect capital mobility is overwhelmingly rejected, rejection of long-term perfect internal capital mobility is not overwhelming.

Suggested Citation

  • Michael Beenstock, 2017. "How internally mobile is capital?," Letters in Spatial and Resource Sciences, Springer, vol. 10(3), pages 361-374, October.
    • Handle: RePEc:spr:lsprsc:v:10:y:2017:i:3:d:10.1007_s12076-017-0190-1
    DOI: 10.1007/s12076-017-0190-1
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    More about this item

    Keywords

    Internal capital mobility; Pairwise panel cointegration; Cross-section dependence;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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