Regional Growth Model With Spatial Externalities

Abstract

This chapter presents a spatially augmented growth model that includes technological interdependence among regions to consider locational and neighbourhood effects on growth. The role of space, which can be defined in several ways, plays an important role in economic growth processes. The different types of tests allow the authors to determine the spatial dependence in regional data and specify an appropriate model. The characteristics of neighbours may stimulate or hamper the economic growth rate of a country. The spillover effects of a country are a substantial issue for a regional perspective in the economic growth process. The economic growth of a country is affected by the performance of growth rate of its neighbours. The economic growth rates depend on both region and neighbouring region characteristics, the weight matrix, which shows the spatial connectivity structure of regions and the strength of spatial dependence based on model specification.