Regional Convergence and Spatial Dependence: A Worldwide Perspective

Abstract

This paper incorporates technological interdependence into a neoclassical regional growth framework with imperfect factor mobility, leading to a convergence equation with spatial effects. The empirical analysis is based on the estimation of a spatial Durbin panel data model and the implementation of multiple imputation techniques. Our results show that taking into account both unobserved heterogeneity and spatial dependence increases the estimated regional convergence rate. This provides an explanation for puzzling findings in the related literature. We also obtain evidence of heterogeneity across country groups regarding the regional speed of convergence and the degree of diffusion of technology.

Keywords: Technological interdependence, regional convergence, spatial Durbin model, panel data, multiple imputation

JEL Classification: C23, O47, R11