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Conditional Beta- and Sigma-Convergence in Space: A Maximum Likelihood Approach

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  • Michael Pfaffermayr

Abstract

Empirical work on regional growth under spatial spillovers uses two workhorse models: the spatial Solow model and Verdoorn's model. This paper contrasts these two views on regional growth processes and demonstrates that in a spatial setting the speed of convergence is heterogenous in both considered models, depending on the remoteness and the income gap of all regions. Furthermore, the paper introduces Wald tests for conditional spatial sigma-convergence based on a spatial maximum likelihood approach. Empirical estimates for 212 European regions covering the period 1980-2002 reveal a slow speed of convergence of about 0.7 percent per year under both models. However, pronounced heterogeneity in the convergence speed is evident. The Wald tests indicate significant conditional spatial sigma-convergence of about 2 percent per year under the spatial Solow model. Verdoorn's specification points to a smaller and insignificant variance reduction during the considered period.

Suggested Citation

  • Michael Pfaffermayr, 2007. "Conditional Beta- and Sigma-Convergence in Space: A Maximum Likelihood Approach," Working Papers 2007-17, Faculty of Economics and Statistics, Universität Innsbruck.
  • Handle: RePEc:inn:wpaper:2007-17
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    More about this item

    Keywords

    Conditional spatial Beta- and Sigma-convergence; Spatial Solow model; Verdoorn's model; Spatial maximum likelihood estimates; European regions;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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