Economic Distance and Cross-Country Spillovers

33 Pages Posted: 6 Mar 2011

See all articles by Ethan A. Ligon

Ethan A. Ligon

University of California, Berkeley; Giannini Foundation

Timothy G. Conley

University of Chicago - Booth School of Business

Date Written: March 15, 2001


Rates of long-run economic growth are not independent across countries. To account for this dependence we decompose the spatial covariance function of growth rates into a function of each country's own observable characteristics, its unobservable characteristics, and cross-country spillovers. We use original data on economic distance to structure observed variation in countries' long term growth rates. We use this structure to estimate the magnitude of economic interdependence among nations, and to give a nonparametric characterization of the relationship between economic distance and the magnitude of cross-country spillovers. These spillovers turn out to be quite important, accounting for more of the spatial covariance in growth rates than unobservable variables, and by some measures rivaling the importance of the country's own observable characteristics.

Suggested Citation

Ligon, Ethan A. and Conley, Timothy G., Economic Distance and Cross-Country Spillovers (March 15, 2001). Available at SSRN: or

Ethan A. Ligon (Contact Author)

University of California, Berkeley ( email )

207 Giannini Hall #3310
Berkeley, CA 94720-3310
United States

Giannini Foundation

UC Davis
Davis, CA 95616
United States

Timothy G. Conley

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7281 (Phone)

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