Income inequality has increased dramatically over the last three decades in most OECD countries, becoming a major international policy concern (Sarfati, 2018). During the same period, there has been a rising share of non-standard contracts, growing careers fragmentation, high
The monitoring of the regional (provincial) economic situation is of particular importance due to the high level of heterogeneity and interdependences among different territories. Although econometric models allow for spatial and serial correlation of various kinds, the limited availability of territorial data restricts the set of relevant predictors at a more disaggregated level, especially for GDPs. Combining data from different sources at NUTS-3 level, this paper evaluates the predictive performance of a spatial dynamic panel data model with individual and time fixed effects and some relevant exogenous regressors, by using data on total GVA for 103 Italian provinces over the period 2000-2016. A comparison with nested panel sub-specifications as well as pure temporal autoregressive specifications has also been included. The main finding is that the spatial dynamic specification increases forecast accuracy more than its competitors throughout the out-of-sample, recognizing an important role played by both space and time. However, when temporal cointegration is detected, the random walk specification is still to be preferred in some cases even in the presence of short panels.
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