Incorporating Technology Diffusion, Factor Mobility and Structural Change Into Cross-Region Growth Regression: An Application to China*

Abstract

ABSTRACT. This paper advocates a spatial dynamic model that introduces technology diffusion, factor mobility, and structural change into the cross-region growth regression. The spatial setting is derived from theory rather than spatial statistical tests. An application of this model to the study of cross-province growth in China over the period 1980-2005 indicates that incomes are spatially correlated, which highlights the significance of technology diffusion and factor mobility. Furthermore, the integration of neoclassical growth empirics and the structural change perspective of development economics provide a much improved account of interprovincial variations in income levels and economic growth.

Foreign Direct Investment and Total Factor Productivity in China: A Spatial Dynamic Panel Analysis*

“…Let denote the mean of g vector. Using the approximation established in Sun et al . (2010) and applying it to d t vector, we extend their to …”

“…(1992) and extends it further to serve the purpose of assessing the productivity and income effect of FDI without imposing the strong assumptions employed in growth accounting. Our theoretical model, which is an extension of Yu (2007) and Sun, Hong and Li (2010), starts from a labour‐augmented Cobb–Douglas production function and explicitly incorporates the FDI intensity variable and inter‐provincial technological spillover and factor mobility into the specification of the TFP function. It further allows the (traditionally uniform) exogenous rate of technological progress to vary across provinces so that significant structural changes which have happened in China's rapid industrialization can be introduced in a manner similar to Temple and Wößmann (2006).…”

Spatial Convergence of Regions Revisited: A Spatial Maximum Likelihood Panel Approach*

“…To derive an empirical specification of the spatial income convergence equation that accounts for labor mobility among regions, Barro and Sala‐i‐Martin (1992, 2004), Braun (1993), and Sung et al. (2010) augment the Solow model postulating a net‐migration function to account for the impact of migration on population growth as response to differentials in income per worker across regions.…”

“…Specifically, population growth in a specific region is composed of the natural population growth rate as determined by fertility net of mortality ( n ), which is assumed constant across regions and the net‐immigration rate. In the spirit of Barro and Sala‐i‐Martin (2004, Equations (9.4) and (9.6), p. 386, 388), Faini (1996, Equation (8), p. 125), and Sung et al. (2010, p. 737), individuals are assumed to migrate from low‐income regions to high‐income regions.…”

“…2 2 With respect to studies at the regional level, Sung, Hong, and Li (2010) seem to be an exception. They consider a labor migration and capital movement function similar to the present paper. …”