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

28 Pages Posted: 29 Apr 2003

See all articles by Harald Badinger

Harald Badinger

Vienna University of Economics and Business

Werner G. Müller

Vienna University of Economics and Business - Department of Applied Statistics and Data Processing

Gabriele Tondl

Vienna University of Economics - Institute for European Affairs/Department of Economics

Date Written: 2002

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: growth, convergence, spatial dependence, spatial filtering, dynamic panels, GMM

JEL Classification: C23, O00, R11

Suggested Citation

Badinger, Harald and Müller, Werner G. and Tondl, Gabriele, Regional Convergence in the European Union (1985-1999): A Spatial Dynamic Panel Analysis (2002). Available at SSRN: https://ssrn.com/abstract=370621 or http://dx.doi.org/10.2139/ssrn.370621

Harald Badinger

Vienna University of Economics and Business ( email )

Department of Economics
Althanstrasse 39-45
Vienna, 1090
Austria

Werner G. Müller

Vienna University of Economics and Business - Department of Applied Statistics and Data Processing ( email )

Augasse 2-6
Vienna A-1090
Austria

Gabriele Tondl (Contact Author)

Vienna University of Economics - Institute for European Affairs/Department of Economics ( email )

Augasse 2-6
A-1090 Vienna
Austria
+43 1 31336 5566 (Phone)
+43 1 31336 758 (Fax)

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