Spatial Clubs in European Regions

This paper finds evidence of spatial clubs in a sample of 254 European regions in the period 1991-2008. A dynamic extension of the Moran scatter plot, consisting in a non parametric estimate of the joint dynamics of GDP per worker and its spatial lag, suggests the emergence of three spatial clubs: one populated by regions belonging to the former Eastern Bloc countries, one by regions of PIGS countries (Portugal, Italy, Greece and Spain) and the last one by regions of other EU countries (notably Germany, France, UK and Northern Europe countries). In the long run the convergence process is evident only to two spatial clubs with Eastern regions converging to PIGS regions. Spatial spillovers are present across European regions, and their contribution to the emergence of spatial clubs is crucial. On the contrary, cross-region heterogeneity in human capital has a very limited impact on the distribution of GDP per worker. Finally, unobserved heterogeneity explains a substantial share of inequality and polarization.