European Regional Convergence in a Human Capital Augmented Solow Model

Discussion Papers 631, 24 S.

Hans-Friedrich Eckey, Christian Dreger, Matthias Türck

2006. Oct.

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In this paper, the process of productivity convergence is investigated for the enlarged European Union using regional (NUTS-2) data. The Solow model extended by human capital is employed as a workhorse. Alternative strategies are proposed to control for spatial effects. All specifications confirm the presence of convergence with an annual speed between 3 and 3.5 percent towards regional steady states. Furthermore, a geographically weighted regression approach indicates a wide variation in the speed of convergence across the regions, where a higher speed is striking in particular in France and the UK. Clusters of convergence can be identified, where regions with high convergence also have high initial income levels.

JEL-Classification: C21;O47;R11;R15
Keywords: Solow model, regional convergence, spatial lags, spatial filtering
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