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Spatial effects on technical progress: growth, and convergence among countries

Author

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  • Fernando Barreiro-Pereira

Abstract

This paper analyses how several spatial variables coming from cities and transportation system can affect money market, specially the income velocity of circulation, assuming an unit-elastic aggregate demand function and considering money velocity as a variable. Fluctuations in velocity caused by some spatial variables, under certain conditions, can affect the aggregate demand curve. The specification of the main relation-ship has found in the Baumol-Tobin model for transaction money demand, and in Christaller-Lösch central place theory. The estimation of the model has been based on panel data techniques and applied across 61 countries during 14 years in the 1978-1991 period. Theoretical and econometric results indicates that seven spatial variables like the country’s first city population, the population density, the passengers-kilometer transported by railways, and several ratios referred to some geographical variables, can provokes fluctuations on aggregate demand curve in the short run. In the long run, the aggregate supply can be also affected by means of these variables. In order to checking this question, considering that these spatial variables are not product factor, we propose to observe if these variables can affect the technological progress coefficient, A, concerning to an aggregate production function, according to a neo-classical growth model. Results by means of the Mankiw, Romer and Weil method, and also by means of an endogenous growth model of technology diffusion, indicates that some spatial variables affect the speed of convergence relative to the real per head income, across these 61 countries. However, a certain amount in some of these variables generates a congestion process in some countries. For checking it, we utilize a Barro and Sala i Martin endogenous growth model which reflects government activities. The concluding remarks indicates that some of these spatial variables above mentioned increases the speed of convergence but generates congestion in some countries. These spatial variables also affect the aggregate supply, and hence the price and output levels. Key words: transportation, regional growth, convergence, congestion. JEL Class.: R41

Suggested Citation

  • Fernando Barreiro-Pereira, 2004. "Spatial effects on technical progress: growth, and convergence among countries," ERSA conference papers ersa04p278, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa04p278
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    References listed on IDEAS

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    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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