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Regional Convergence in the European Union (1985-1999): A Spatial Dynamic Panel Analysis

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  • Badinger, Harald
  • Muller, Werner G.
  • Tondl, Gabriele

Abstract

We estimate the speed of income convergence for a sample of 196 European NUTS 2 regions over the period 1985-1999. So far there is no direct estimator available for dynamic panels with strong spatial dependencies. We propose a two-step procedure, which involves first spatial filtering of the variables to remove the spatial correlation, and application of standard GMM estimators for dynamic panels in a second step. Our results show that ignorance of the spatial correlation leads to potentially misleading results. Applying a system GMM estimator on the filtered variables, we obtain a speed of convergence of 6.9 per cent and a capital elasticity of 0.43.

Suggested Citation

  • Badinger, Harald & Muller, Werner G. & Tondl, Gabriele, 2002. "Regional Convergence in the European Union (1985-1999): A Spatial Dynamic Panel Analysis," Discussion Paper Series 26329, Hamburg Institute of International Economics.
    • Handle: RePEc:ags:hwwadp:26329
    DOI: 10.22004/ag.econ.26329
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    More about this item

    Keywords

    Community/Rural/Urban Development;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O00 - Economic Development, Innovation, Technological Change, and Growth - - General - - - General

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