The Annals of Regional Science

, Volume 40, Issue 4, pp 693–721

Pan-European regional income growth and club-convergence

Insights from a spatial econometric perspective
Original Paper

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 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 neglect of this bias would give rise to misleading conclusions.

JEL Classification

C21 D30 E13 O18 O52 R11 R15 

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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  1. 1.Institute for Economic Geography and GIScienceVienna University of Economics and Business AdministrationViennaAustria
  2. 2.Deutsche Bundesbank Germany

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