A class of growth theories explains the formation of convergence clubs among economies by differences in certain initial conditions. So far, it has not been tested empirically whether these initial conditions are indeed responsible for the appearance of multiple steady state equilibria. In this paper we tackle this issue by considering data on 206 European regions' per capita income from 1990 to 2005. We employ a novel regression based convergence test developed by Phillips and Sul (2007) that enables the endogenous determination of convergence clubs. As this method requires cross-section observations to be independent, we first apply a spatial filtering technique in order to remove the spatial component from the data. Results strongly support the existence of convergence clubs, indicating that European regions form five separate groups converging to their own steady state paths. Moreover, estimates from an ordered probit model reveal that the level of initial conditions, such as human capital and per capita income, plays a crucial role in determining the formation of convergence clubs among European regions.
This paper employs a spatial Durbin model for analyzing the impact of human capital on regional productivity using for 198 NUTS-2 European regions for the sample period from 1995 to 2004. The study provides evidence for the existence of spatial externalities and interactions of the sort as emphasized by new growth theory. To interpret results meaningfully, we calculate summary measures that account for the simultaneous feedback nature of the underlying model. By sampling from the parameter distribution we present measures of dispersion, revealing that it is relative regional advantages in human capital that matter most for productivity growth.
This paper employs a spatial Durbin model for analyzing the impact of human capital on regional productivity using for 198 NUTS-2 European regions for the sample period from 1995 to 2004. The study provides evidence for the existence of spatial externalities and interactions of the sort as emphasized by new growth theory. To interpret results meaningfully, we calculate summary measures that account for the simultaneous feedback nature of the underlying model. By sampling from the parameter distribution we present measures of dispersion, revealing that it is relative regional advantages in human capital that matter most for productivity growth.
A class of growth theories explains the formation of convergence clubs among economies by differences in certain initial conditions. So far, it has not been tested empirically whether these initial conditions are indeed responsible for the appearance of multiple steady state equilibria. In this paper we tackle this issue by considering data on 206 European regions' per capita income from 1990 to 2005. We employ a novel regression based convergence test developed by Phillips and Sul (2007) that enables the endogenous determination of convergence clubs. As this method requires cross-section observations to be independent, we first apply a spatial filtering technique in order to remove the spatial component from the data. Results strongly support the existence of convergence clubs, indicating that European regions form five separate groups converging to their own steady state paths. Moreover, estimates from an ordered probit model reveal that the level of initial conditions, such as human capital and per capita income, plays a crucial role in determining the formation of convergence clubs among European regions.
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