Growth, Human Capital and Spillovers

This book presents the spatially augmented MRW model. We formulate five distinct hypotheses to investigate the role of human capital and relative location on economic growth in the lens of spatial econometrics. We consider 193 regions across 15 Western European countries over the period 1977-2002 to empirically test the spatially extended MRW model. Time spans and fixed effects are given a due emphasis in our space-time dynamic model. The spatially augmented Arrelano and Bond (1991) GMM estimator together with Elhorst's (2010) ML estimator is applied to overcome the usual small-sample downward lagged dependent variable bias under the fixed effects space-time dynamic panel data model. We make some improvements in Elhorst et al.'s (2010) set of instruments used in the estimation of the spatially extended MRW model.