The Spatial Dimension of Trade‐ and FDI‐driven Productivity Growth in Chinese Provinces: A Global Cointegration Approach

This paper analyses the major determinants of long‐ and short‐run labour productivity evolution for Chinese provinces between 1978 and 2010. The role played by openness to trade and foreign direct investment (FDI) constitutes the main focus of this analysis. From a methodological perspective, our main contribution is the inclusion of spatial effects into a dynamic error correction modelling framework. The results show that, in addition to domestic factors such as investment intensity and infrastructure use, trade openness and inward FDI also exert a direct impact on labour productivity. Furthermore, the geographical environment has a strong indirect influence on productivity: The more a region is surrounded by high‐productive regions with good infrastructure and linkages to the world economy, the higher are its productivity level and growth rate. The magnitude of these impacts varies by spatial regime (coastal, interior provinces) and time period in focus. Especially in the recent past, trade and FDI activity appear to be increasingly important drivers of regional productivity evolution, both for coastal and interior regions. These findings have important policy implications: In order to fully exploit the benefits from such spillovers, coordinated industrial policies which foster regional complementarities and support the free movement of production factors across regional borders are crucial.     

The Direct and Indirect (Spillover) Effects of Productive Government Spending on State Economic Growth

Using data on 48 contiguous U.S. states and a spatial econometric approach, this paper examines short‐ and long‐run effects of productive higher education and highway infrastructure spending financed by different revenue sources on state economic growth. Following the Lagrange Multiplier, Wald, and Likelihood Ratio tests, the data are found to be characterized by both spatial lag and spatial error processes, leading to the estimation of a dynamic spatial Durbin model. By decomposing results of the dynamic spatial Durbin model into short‐ and long‐run direct as well as indirect (spillover) effects, we show that accounting for spillover effects provides a more comprehensive approach to uncovering the effects of productive government spending on growth. We find that, regardless of the financing source, productive higher education and highway spending have statistically significant short‐ and long‐run direct as well as spillover effects on state income growth.     

Spatial evaluation of knowledge spillover benefits in China’s free trade zone provinces and cities

China has established several free trade zones (FTZs) in recent years, which are becoming new drivers of growth for regional economic development. As the FTZ reform deepens, protecting intellectual property rights and improving application systems have become important for encouraging innovation in FTZs. To understand the knowledge spillover effects in different FTZs, this paper selects indicators at different levels of knowledge evaluation and uses the 2017 data of the provinces and cities where the first three batches of FTZs set up by China are located as samples to perform empirical analysis on knowledge spillover effects with a corrected spatial knowledge spillover model. According to the evaluation, the spatial knowledge spillover effects vary among FTZs—the spatial knowledge spillover effects of economically developed regions are smaller (0.0421), while their spillover effects on other FTZs are bigger (0.0795). In addition, the knowledge spillover effects of adjacent FTZ provinces and cities are significantly greater; the spatial spillover effects of southeastern coastal FTZ provinces and cities are more than those of central and western regions as well as northeastern provinces and cities (0.0795; 0.0533; 0.0672). This study is helpful for governments and policy makers to develop appropriate incentive policies for knowledge innovation targeting the knowledge spillover characteristics of different FTZs.     

Regional impact and spillover effect of public infrastructure investment: An empirical study in the Yangtze River Delta,China

Since China's reform and opening up, public infrastructure investments have significantly improved. These investments drive China's long-term economic growth. Based on panel data of 41 cities in the Yangtze River Delta from 2006 to 2017, the simultaneous equation models (SEMs) are constructed to explore the regional impact and spillover effect of infrastructures with resolving endogenous problems. Public infrastructure investment remains to have a systemic effect on household income, urban population, and land prices in certain regions. In certain region, the estimated coefficients of public infrastructure investment are consistent with expectations and significant, which are 0.523, 0.142, and 0.781 with three-stage least squares method. And the endogenous variables also affect public infrastructure investment. But, the coefficient of the spatial term is −0.019, negative and not significant. The cross-regional spillover effect of public infrastructure investment is nonsignificant using the generalized spatial three-stage least squares method.     

Employment volatility in lagging and advanced regions: The Italian case

The presence of cycles characterizes all economic systems, but economic cycles have differentiated spatial impacts. Some regions have broader cycles with respect to the country, while others tend to be less responsive to shocks and hence have narrower cycles. Being exposed to broader cycles, that is, greater volatility, may increase the strain on a regional economic system. This paper investigates the different responsiveness to cyclical forces and volatility of regions in the long run. It does so by using quarterly employment data for the Nuts2 Italian regions over almost 40 years before and during the period 1978–2016. Explored in particular are the cross-regional variations in employment volatility and the reasons for the patterns observed, as well as whether they have changed the following different macroeconomic policy regimes. The paper identifies the break dates of different regimes, and these regime changes will be related to policy modifications, such as the implementation of the European Monetary Union. The determinants of this regional volatility appear to be quite stable, so that the changes in volatility are explained by how these determinants have changed overtime and how they are unevenly distributed in space. In particular, the lagging regions of the country suffer, in addition to lower production and income, from higher volatility due to a structure which is weaker and more unstable. Volatility can hence be an additional issue for lagging regions.     

Internet development and the spatial optimization of regional productivity: Evidence from China

The rapid development of the Internet had a profound influence on the spatial distribution of economic output activities. On the basis of theoretical analysis, this study takes China's regions as research samples and construct a spatial econometric model to empirically analyze the impact of Internet development on regional productivity. The analysis reveals that the distribution of regional productivity in China had significant spatial correlation; regional productivity had positive spatial externalities; Internet development had significant promotion effects and positive spatial spillover effects to regional productivity, but the effects are heterogeneous in different subregions. The subregion analysis shows that the optimization effect of the Internet on regional productivity exhibits heterogeneity in different subregions. The threshold effect analysis reveals the increasing marginal effect of Internet development on regional productivity, and economic development and human capital supply are important factors restricting this marginal effect. Altogether, this study provides useful references on the positive effects of the Internet on regional productivity in the spatial dimension, and suggests that the policy makers can optimize the spatial distribution of regional productivity by promoting Internet access in various regions and narrowing the digital divide among regions.     

On the drivers of UK direct investment in the Spanish regions: A spatial Durbin approach

This paper empirically examines the key factors driving UK direct investment in the Spanish regions over the period 2000–2016 and, consequently, tries to unveil its main motivation. Applying a spatial Durbin panel model to capture spatial linkages, the results point to the existence of complementarity between the FDI received by a region and that of the remaining ones. This outcome, along with a positive and statistically significant spillover effect of market potential, reveals that complex-vertical FDI motivation with agglomeration economies prevails among UK MNEs investing in Spain. Additionally, our findings unveil the role played by some other FDI drivers, such as wages and infrastructure. Furthermore, the paper is unique in decomposing the average direct and spillover effects by region and pairs of regions, so that remarkable differences can be identified. This breakdown has strong significance from a policy perspective since it can guide regional policy makers. In short, our findings point out to the fact that FDI policy should be jointly designed by those regions presenting strong bilateral spillover effects. Thus, greater cooperation among policy makers would be welcome.     

The role of national settings in the economic resilience of regions—Evidence from recessionary shocks in Europe from 1990 to 2014

This paper focuses on the particular role of the national setting for the economic resilience of regions during the resistance and recovery phase. Our empirical set-up introduces a spatial hierarchy of 249 NUTS-2 regions nested in 22 European countries while it includes numerous recessionary shocks from 1990 to 2014. Our results suggest that the impact of the national setting is strongest during the resistance phase when the national level accounts for up to 44.9% of the variance in regional GDP development. During recovery, however, the national share decreases but still amounts to no less than 22.0%. Apart from the direct effects that originate from, for example, regulatory density and fiscal policy measures, the national impact takes the form of cross-level moderation effects. These indirect effects indicate that the regional patterns of resilience are additionally shaped by the inter-linkages of country-specific institutional factors and regional determinants. Taking all this into account, regional economic resilience is anything but just a matter of regional capacities.     

Behind the Pan‐European Convergence Path: The Role of Innovation,Specialisation and Socio‐economic Factors

The paper analyses the determinants of regional disparities in per capita gross domestic product (GDP) and their evolution over time in the enlarged European Union (EU). With reference to the literature it groups EU regions on the basis of three different factors—specialisation, socio‐economic features, and innovation. It then analyses regional disparities in per capita GDP (EU‐relative and country‐relative) across groups over 2004–2011 using both non‐parametric tools and traditional regression analysis with spatial effects. The paper finds that EU‐wide convergence actually conceals growing divergence across old member regions and within new members. Coming to the factors that lie at the heart of regional disparities, country factors lose importance for newcomers but become more important for older members, notwithstanding longstanding integration. Socio‐economic factors and innovation instead become increasingly important for all areas, socio‐economic factors lying at the heart of within‐country differences and innovation more of those between regions. Finally, specialisation appears to have a lower explanatory power.     

The Local versus Global Dilemma of the Effects of Structural Funds

This paper extends the analysis by Dall'erba and Le Gallo dealing with the impact of structural funds on the growth process of European regions. Like most of the other 18 contributions assessing the efficiency of structural funds, our article was based on a global model of β‐convergence: one coefficient pertaining to the structural funds variable was estimated for the whole sample. In this paper, we extend this approach by performing local estimations, where one coefficient is estimated for each region, so that the impact of structural funds can be regionally differentiated. As in the previous contribution, the presence of spatial spillover effects is taken into account using spatial econometric techniques, but here we apply a Bayesian locally linear spatial estimation method on a conditional β‐convergence model, which allows global and local β‐convergence to be viewed in a continuous fashion. Our results indicate that structural funds have a weak global impact on the European Union regional growth process, but that their local impacts are very diverse, with a positive influence on the growth of British, Greek, and southern Italian regions.     

Spatio-temporal pattern evolution and spatial spillover effect of green development efficiency: Evidence from Shandong Province,China

Improving green development efficiency is urgently required, yet challenging, since it comprehensively reflects the bidirectional evolutionary relationship between regional development and resource and environmental consumption. The issue of regional green development efficiency has become a key topic; however, where the increase in efficiency originates and its spatial spillover effect remains unclear to date. Therefore, the spatial spillover effect of the green development efficiency of Shandong Province was quantified through the slack variable (SBM)-Undesirable and Spatial Durbin model. The green development efficiency showed clear spatial differentiation in Shandong Province. This was more obvious than the polarized development trend of the provincial capital circle that has Jinan at its core and the eastern coastal region with Qingdao at its core. Green development efficiency has a significant spatial spillover effect. The regression coefficient of the direct effect of the economic development level is positive. The regression coefficient of the indirect effect of the marketization level and government financial support level is negative. Science and technology played a positive role in the promotion of the green development efficiency of local and neighboring cities. This study contributes empirical evidence to the green development efficiency associated with regional development and resource and environment consumption of Shandong Province.     

From R&D to Innovation and Economic Growth in the EU

ABSTRACT Over the last two decades many European governments have pursued ambitious research and development (R&D) policies with the aim of fostering innovation and economic growth in peripheral regions of Europe. The question is whether these policies are paying off. Arguments such as the need to reach a minimum threshold of research, the existence of important distance decay effects in the diffusion of technological spillovers, the presence of increasing returns to scale in R&D investments, or the unavailability of the necessary socio‐economic conditions in these regions to generate innovation seem to cast doubts about the possible returns of these sort of policies. This paper addresses this question. A two‐step analysis is used in order to first identify the impact of R&D investment of the private, public, and higher education sectors on innovation (measured as the number of patent applications per million population). The influence of innovation and innovation growth on economic growth is then addressed. The results indicate that R&D investment, as a whole, and higher education R&D investment in peripheral regions of the EU, in particular, are positively associated with innovation. The existence and strength of this association are, however, contingent upon region‐specific socio‐economic characteristics, which affect the capacity of each region to transform R&D investment into innovation and, eventually, innovation into economic growth.     

How does industrial agglomeration affect regional innovation? A spatial econometric analysis

This study empirically investigates the direct and indirect (spillover) effects of three types of industrial agglomeration with different cognitive distances, namely, industrial specialization, industrial related variety, and industrial unrelated variety, on regional innovation. Accordingly, we applied the concepts of related and unrelated variety and used spatial econometric analysis. Based on panel data of 283 Chinese cities from 2004 to 2016, the empirical results reveal that both industrial specialization and industrial related variety significantly improve regional innovation and produce positive spatial spillover effects on the surrounding regions. However, industrial unrelated variety has a significant negative impact on regional innovation and produces a negative spatial spillover effect on the surrounding regions. Moreover, the direct and indirect effects of the three types of industrial agglomeration on regional innovation between China's coastal and inland cities. The findings have important theoretical and policy implications.     

Interregional Fiscal Accounting

ABSTRACT Fiscal devolution fiom federal to state jurisdictions gives states more authority but also more responsibility for redistributing and stabilizing income. Both the revenue and expenditure sides of a state's budget are affected. This paper describes a social accounting matrix approach to documenting multi-regional, multi-jurisdiction fiscal accounts, called a fiscal SAM. Two of the many potential uses of a fiscal SAM are demonstrated. First, a fiscal SAM of rural, urban, and metro areas of Iowa is used directly to describe and compare the benchmark net fiscal situations of interdependent regions. Second, it is used to analyze the impacts of an economic downturn under a block-grant welfare system. Substate regions are relatively more specialized than state or national economies. Thus, for example, shocks to agriculture will directly affect agriculture-dependent counties more than other types of counties. Substate regions are also more interdependent than states, as well as more open than the nation as a whole. This means that indirect and spatial spillover effects of fiscal and other exogenous changes can be surprisingly large between counties. Here, analysis of fhe multipliers highlights the relative intensities of within and across-region effects of changes in the form of intergovernmental transfers. The multiplier simulation estimates the relative impacts and spillover effects of economic shocks under the new regime.     

Global Markets and the Role of Geographical Proximity in Mexico's Employment Growth

In the context of greater economic integration with global markets and structural economic reforms, this paper analyses regional and sectoral employment growth dynamics in Mexican states between 2004 and 2014. The methodology is based on spatial shift‐share analysis that explicitly considers interregional interactions in employment while assessing potential spillover effects arising from spatial interactions among states and industrial sectors. The results suggest a competitive effect from some industries—such as those related to science and specialized suppliers, intensive scale industries and dominated providers—which led to the formation of industrial corridors of neighboring states that connect the central region with the northeast region of the country. It was also found that proximity to states such as Nuevo Leon, Queretaro, Guanajuato, San Luis Potosi, and Puebla has positively influenced neighboring states in terms of employment growth rates. The results also support the argument of some sort of de‐concentration of economic activity in the capital, Mexico City, toward neighboring states.     

Spatial Clusters in EU Productivity Growth

In the last year, a central issue in regional economic growth debate has been represented by the empirical analysis of Verdoorn's law related to the long‐term dynamic relationship between the rate of growth in output and the productivity growth due to increasing returns. Several papers have tested Verdoorn's law on European countries as well as many other world economies. Recently, attempts have been made to provide foundations for a spatial version of the original law specification. The main contributions were dedicated to the inclusion of spatial dependence in the economic model. Surprisingly, in the literature on Verdoom's law the analysis of the spatial heterogeneity is not often considered. The aim of this paper is the regional analysis of the spatial dependence and heterogeneity in Verdoorn's law, identifying spatial regimes that can be interpreted as clusters of productivity growth in European regions at NUTS 2 level. To pursue this objective, an optimization algorithm for the identification of groups is used. This constitutes a modified version of Simulated Annealing.     

State Infrastructure and the Geography of Employment

ABSTRACT The effects of state public capital investment on economic growth is an important question that has been the focus of a recent substantial research effort. But the majority of this research has ignored these investments’influence on the intra-state pattern of economic activity. Yet if external agglomeration economies are important determinants of growth, then investments may indirectly affect growth by fostering or discouraging agglomeration. This paper discusses the effect of state infrastructure investments on the distribution of employment within states and the implications of these spatial effects for aggregate state employment growth. Preliminary empirical results suggest that state infrastructure investments tend to redistribute growth from areas of dense employment to other parts of the state. This redistribution may diminish agglomeration benefits offered by cities, which has the potential to reduce state growth. The paper concludes with a discussion of implications of the work for research and policy.     

Regional inflation persistence in Turkey

The purpose of the current study is to investigate the degree of inflation persistence, its geographical variation, sources of cross‐regional variation, and presence of geographical/sectoral aggregation bias in national monetary policy. Our data set covers 26 NUTS‐2 level Turkish regions and monthly CPI inflation over the period 2003–2019. We first estimate the degree of regional inflation persistence by autoregressive regressions, check its robustness against the presence of structural breaks (by Bai–Perron's algorithm) and nonlinearities (by Markovian Regime Switching regressions). Second, we examine the possibility of geographical and sectoral aggregation bias. Third, we investigate the cross‐regional determinants of inflation persistence by panel data analysis, employing hybrid‐effects spatial panel regressions. We analyze the direct and indirect effects of the determinants and test for regional spillover effects. Three main results are obtained. First, estimated persistence degrees are heterogeneous across regions. The geographical pattern is empirically robust against structural breaks and nonlinearities. We find that inflation persistence is distributed in a spatially correlated manner. Second, when sectoral and regional aggregation bias is tested, only sectoral aggregation indicates a considerable level of bias. Third, we find that the presence of large firms in the region and a higher share of agricultural output in GDP leads to lower persistence, while an increased share of industrial output, and increased trade volume leads to higher inflation persistence. Moreover, we find spatial spillovers of price variability evident in regression analysis. From a policy standpoint, it is required that structural policy programs are targeted to maintain flexibility in the regions where persistence is high (i.e., providing market entry/exit, institutional quality, policy credibility, stimulation of SMEs). Moreover, sectors that have high persistence, such as Hotels and Restaurants (persistence degree 0.55) and Health Services (0.39) should be weighted more in CPI calculations.     

The Influence of Agglomeration Externalities on Manufacturing Growth Within Indonesian Locations

Differences in agglomeration externalities and industrial regimes between locations generate performance differentials for their localized economic activities. For more than two decades, scholars have debated which externality is dominant for growth and under which regime. This study aims to resolve this debate by analyzing the influence of agglomeration economies on the growth of five‐digit manufacturing sectors and firms for Indonesian cities and regencies between 2000 and 2009. This is investigated employing the recent reconceptualization of variety based on sectoral linkages distinguishing related and unrelated varieties, which allow assessing their idiosyncratic economic roles. The findings support that economic relatedness is the dominant source for expansion of sectors and firms within Indonesian locations. Specialized clusters and competition are inversely related to manufacturing growth, although the latter fosters sectoral employment within Indonesian regencies. Population density and human capital show antithetic effects between cities and regencies due to their distinctive urbanization trajectories and industrial compositions.     

Estimation of eco-efficiency and identification of its influencing factors in China's Yangtze River Delta urban agglomerations

Eco-efficiency is an important indicator which serves as a helpful instrument for the studies of sustainable development. This paper estimated the eco-efficiency of 26 cities in China's Yangtze River Delta urban agglomerations. Based on different matrixes, Moran's I was applied to analyze the spatial correlation. The spatial Durbin model was applied to analyze the direct and indirect effect of influencing factors. Some conclusions were drawn. (a) The average eco-efficiency showed an increasing trend. The regional difference of eco-efficiency decreased and then increased. Shanghai's eco-efficiency had been the highest. (b) The eco-efficiency showed positive spatial autocorrelation and it also exhibited significant characteristic of local spatial autocorrelation. (c) Economic development, fixed assets investment, and technological level of one city had a significant positive impact on the eco-efficiency of the city itself. Industrial structure, fiscal decentralization, and foreign direct investment of a city had a significant negative impact on the eco-efficiency of the city itself. Changes in the economic development and technological levels in a city had positive impacts on the eco-efficiency of its neighboring cities. Foreign direct investment had a negative spatial spillover effect. (d) This paper suggested that it is necessary to pay attention to the interaction of influencing factors among cities.