The Determinants of Economic Growth in European Regions

42 Pages Posted: 19 Jan 2009

See all articles by Jesús Crespo Cuaresma

Jesús Crespo Cuaresma

University of Innsbruck - Department of Economic Theory, Economic Policy and Economic History

Gernot Doppelhofer

University of Cambridge - Faculty of Economics and Politics; CESifo (Center for Economic Studies and Ifo Institute)

Martin Feldkircher

Oesterreichische Nationalbank (OeNB)

Date Written: January 2009

Abstract

We use Bayesian Model Averaging (BMA) to evaluate the robustness of determinants of economic growth in a new dataset of 255 European regions in the 1995-2005 period. We use three different specifications based on (1) the cross-section of regions, (2) the cross-section of regions with country fixed effects and (3) the cross-section of regions with a spatial autoregressive (SAR) structure. We investigate the existence of parameter heterogeneity by allowing for interactions of potential explanatory variables with geographical dummies as extra regressors. We find remarkable differences between the determinants of economic growth implied by differences between regions and those within regions of a given country. In the cross-section of regions, we find evidence for conditional convergence with speed around two percent. The convergence process between countries is dominated by the catching up process of regions in Central and Eastern Europe (CEE), whereas convergence within countries is mostly a characteristic of regions in old EU member states. We also find robust evidence of positive growth of capital cities, a highly educated workforce and a negative effect of population density.

Keywords: model uncertainty, spatial autoregressive model, determinants of economic growth, European regions

JEL Classification: C11, C15, C21, R11, O52

Suggested Citation

Crespo Cuaresma, Jesús and Doppelhofer, Gernot and Feldkircher, Martin, The Determinants of Economic Growth in European Regions (January 2009). CESifo Working Paper Series No. 2519. Available at SSRN: https://ssrn.com/abstract=1329900

Jesús Crespo Cuaresma

University of Innsbruck - Department of Economic Theory, Economic Policy and Economic History ( email )

Universitaetsstrasse 15
Innsbruck, A - 6020
Austria

Gernot Doppelhofer (Contact Author)

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Martin Feldkircher

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3
1090 Vienna
Austria

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