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Capital Deepening and Regional Inequality: An Empirical Analysis (refereed paper)

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  • Daniel Felsenstein

Abstract

We present a simple reproducible methodology for constructing regional capital stock data, which we apply to Israel. We find that capital deepening has been sigma-convergent since 1985. This process is "inverted" since capital stocks and capital-labor ratios in the richer center have been catching-up with their counterparts in the poorer periphery. We explain this phenomenon in terms of fundamental changes in regional policy. Despite this, regional wages have not been sigma-convergent because other wage determinants have been sigma-divergent

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  • Daniel Felsenstein, 2011. "Capital Deepening and Regional Inequality: An Empirical Analysis (refereed paper)," ERSA conference papers ersa10p759, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa10p759
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    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa10/ERSA2010finalpaper759.pdf
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    References listed on IDEAS

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    1. Michael Beenstock & Daniel Felsenstein, 2007. "Spatial Vector Autoregressions," Spatial Economic Analysis, Taylor & Francis Journals, vol. 2(2), pages 167-196.
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    8. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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    11. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
    12. Arie Bregman & Melvyn Fuss & Haim Regev, 1998. "The Effects of Capital Subsidization on Israeli Industry," Working Papers fuss-98-01, University of Toronto, Department of Economics.
    13. Koeniger, Winfried & Leonardi, Marco, 2006. "Capital Deepening and Wage Differentials: Germany vs. US," IZA Discussion Papers 2065, Institute of Labor Economics (IZA).
    14. Subodh Kumar & R. Robert Russell, 2002. "Technological Change, Technological Catch-up, and Capital Deepening: Relative Contributions to Growth and Convergence," American Economic Review, American Economic Association, vol. 92(3), pages 527-548, June.
    15. Dafna Schwartz & Michael Keren, 2006. "Location incentives and the unintentional generation of employment instability:some evidence from Israel," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 40(2), pages 449-460, June.
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    1. Michael Beenstock & Daniel Felsenstein & Ziv Rubin, 2017. "Does foreign direct investment polarize regional earnings? Some evidence from Israel," Letters in Spatial and Resource Sciences, Springer, vol. 10(3), pages 385-409, October.
    2. Eduardo A. Haddad & Renato S. Vieira & Inácio F. Araújo & Silvio M. Ichihara & Fernando S. Perobelli & Karina S. S. Bugarin, 2022. "COVID-19 crisis monitor: assessing the effectiveness of exit strategies in the State of São Paulo, Brazil," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(2), pages 501-525, April.
    3. Makram El‐Shagi & Steven Yamarik, 2019. "State‐level capital and investment: Refinements and update," Growth and Change, Wiley Blackwell, vol. 50(4), pages 1411-1422, December.
    4. Michael Beenstock, 2017. "How internally mobile is capital?," Letters in Spatial and Resource Sciences, Springer, vol. 10(3), pages 361-374, October.
    5. Yuval Arbel & Chaim Fialkoff & Amichai Kerner & Miryam Kerner, 2022. "Do population density, socio-economic ranking and Gini Index of cities influence infection rates from coronavirus? Israel as a case study," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(1), pages 181-206, February.

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