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

Harald Badinger, Werner Müller and Gabriele Tondl (gabriele.tondl@wu.ac.at)

No 26329, Discussion Paper Series from Hamburg Institute of International Economics

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.

Keywords: Community/Rural/Urban; Development (search for similar items in EconPapers)
Pages: 29
Date: 2002
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:hwwadp:26329

DOI: 10.22004/ag.econ.26329

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