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Theories of Local Economic Growth (Part 2): Model Specification and Empirical Validation

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  • Paul Plummer

    (Department of Geography, University of Southampton, Highfield, Southampton SO17 1BJ, England)

  • Mike Taylor

    (Department of Geography, Buckingham Building, Lion Terrace, University of Portsmouth, Portsmouth PO1 3HE, England)

Abstract

This study is an attempt to produce a theoretically informed econometric analysis of dynamic regional economic performance. The first paper in this two-part study highlighted the problems and possibilities of translating the propositions contained in six ‘soft’ theories of local economic growth into measurable dimensions and sets of proxy variables that are hypothesized to determine local economic growth. This second paper focuses on issues of econometric-model design and empirical validation. Given the practical limitations imposed by data availability, the ‘soft’ theories of local economic growth are modeled by a simple conditional ‘gap’ convergence model in which prevailing regional unemployment relativities are determined by a common trend in unemployment and a set of regionally specific variables. The empirical validity of the competing ‘soft’ theories of local economic growth is evaluated by applying test restrictions imposed by the ‘soft’ theories to a general model specification containing eight regionally specific variables that have been identified as potential drivers of local economic growth. The econometric modeling of Australian data suggests that the processes of regional economic performance might be somewhat different from those specified in individual theoretical models. Significantly, the role of local ‘enterprise culture’ is revealed—built on specialization, technological leadership, human resources, and the local integration of firms—though significant caveats are attached to the roles of access to information, institutional support, and interregional trade as promoters of local economic growth.

Suggested Citation

  • Paul Plummer & Mike Taylor, 2001. "Theories of Local Economic Growth (Part 2): Model Specification and Empirical Validation," Environment and Planning A, , vol. 33(3), pages 385-398, March.
    • Handle: RePEc:sae:envira:v:33:y:2001:i:3:p:385-398
    DOI: 10.1068/a339b
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    References listed on IDEAS

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    1. Adrian C. Darnell & J. L. Evans, 1990. "The Limits of Econometrics," Books, Edward Elgar Publishing, number 119, December.
    2. Ron Martin & Peter Sunley, 1998. "Slow Convergence? The New Endogenous Growth Theory and Regional Development," Economic Geography, Taylor & Francis Journals, vol. 74(3), pages 201-227, July.
    3. Wojciech W. Charemza & Derek F. Deadman, 1997. "New Directions In Econometric Practice, Second Edition," Books, Edward Elgar Publishing, number 1139, December.
    4. Bernard Fingleton, 1999. "Estimates of Time to Economic Convergence: An Analysis of Regions of the European Union," International Regional Science Review, , vol. 22(1), pages 5-34, April.
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    1. Artelaris, Panagiotis & Arvanitidis, Paschalis & Petrakos, George, 2006. "Theoretical and Methodological Study on Dynamic Growth Regions and Factors Explaining their Growth Performance," Papers DYNREG02, Economic and Social Research Institute (ESRI).
    2. N/A, 2001. "How Much does Place Matter?," Environment and Planning A, , vol. 33(8), pages 1335-1369, August.
    3. George A. Erickcek & Hannah McKinney, 2006. "“Small Cities Blues:†Looking for Growth Factors in Small and Medium-Sized Cities," Economic Development Quarterly, , vol. 20(3), pages 232-258, August.
    4. Alexiadis, Stilianos & Eleftheriou, Konstantinos & Nijkamp, Peter, 2013. "Technology adoption within a search model: Evidence from OECD countries," Economic Modelling, Elsevier, vol. 33(C), pages 137-148.
    5. Xie, Kefan & Song, Yu & Zhang, Weiyong & Hao, Jiahui & Liu, Zimei & Chen, Yun, 2018. "Technological entrepreneurship in science parks: A case study of Wuhan Donghu High-Tech Zone," Technological Forecasting and Social Change, Elsevier, vol. 135(C), pages 156-168.

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