Growth and Spatial Dependence in Europe

The convergence of European regions has been largely discussed in the empirical literature during the last decade. Two observations are often emphasized. First, the convergence rate among European regions appears to be very slow (Barro and Sala-i-Martins 1991, 1995; Armstrong 1995, Sala-i-Martin 1996a,b). Second, the tools used in the regional science literature show that the geographical distribution of European per capita GDP is highly clustered and characterized by global and local autocorrelation (Armstrong 1995; Ertur et al. 2007; López-Bazo et al. 1999; Le Gallo and Ertur 2003 with a UE15 regional database and Ertur and Koch 2006, with a UE27 enlarged regional database). Many other studies also provide evidence of global and local spatial autocorrelation as Rey and Montouri (1999) for US State data on per capita income throughout the period 1929–1994, Ying (2000) for growth rates of production in the Chinese provinces since the late 1970s, and Conley and Ligon (2002). These authors also develop an empirical approach that explicitly allows for interdependence among countries, and they underline the importance of cross-country spillovers in explaining growth using an international database.