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Pan-European Regional Income Growth and Club-Convergence - Insights from a Spatial Econometric Perspective

Manfred Fischer and Claudia Stirböck ()
Authors registered in the RePEc Author Service: Claudia Stirboeck ()

ERSA conference papers from European Regional Science Association

Abstract: Club-convergence analysis provides a more realistic and detailed picture about regional income growth than traditional convergence analysis. This paper presents a spatial econometric framework for club-convergence testing that relates the concept of club-convergence to the notion of spatial heterogeneity. The study provides evidence for the club-convergence hypothesis in cross-regional growth dynamics from a pan-European perspective. The conclusions are threefold. First, we reject the standard Barro-style regression model which underlies most empirical work on regional income convergence, in favour of a two regime [club] alternative in which different regional economies obey different linear regressions when grouped by means of Getis and Ord's (1992) local clustering technique. Second, the results point to a heterogeneous pattern in the pan-European convergence process. Heterogeneity appears in both the convergence rate and the steady-state level. But, third, the study also reveals that spatial error dependence introduces an important bias in our perception of the club-convergence and shows that neglection of this bias would give rise to misleading conclusions.

Date: 2005-08
New Economics Papers: this item is included in nep-eec and nep-geo
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