Spatial Externalities and Growth in a Mankiw-Romer-Weil World: Theory and Evidence

Fischer, Manfred M. ORCID: (2015) Spatial Externalities and Growth in a Mankiw-Romer-Weil World: Theory and Evidence. Working Papers in Regional Science, 2015/04. WU Vienna University of Economics and Business, Vienna.


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This paper presents a theoretical growth model that accounts for technological interdependence among regions in a Mankiw-Romer-Weil world. The reasoning behind the theoretical work is that technological ideas cannot be fully appropriated by investors and these ideas may diffuse and increase the productivity of other firms. We link the diffusion of ideas to spatial proximity and allow for ideas to flow to nearby regional economies. Through the magic of solving for the reduced form of the theoretical model and the magic of spatial autoregressive processes, the simple dependence on a small number of neighbouring regions leads to a reduced form theoretical model and an associated empirical model where changes in a single region can potentially impact all other regions. This implies that conventional regression interpretations of the parameter estimates would be wrong. The proper way to interpret the model has to rely on matrices of partial derivatives of the dependent variable with respect to changes in the Mankiw-Romer-Weil variables, using scalar summary measures for reporting the estimates of the marginal impacts from the model. The summary impact measure estimates indicate that technological interdependence among European regions works through physical rather than human capital externalities.

Item Type: Paper
Additional Information: Draft versions of the paper had been presented as a keynote lecture speech at the World Congress of the Regional Science Association International in Timisoara (Romania), 9-12 May 2012, and as the EIB [European Investment Bank]-ERSA Prize lecture at the 52nd Congress of the European Regional Science Association in Bratislava [Slovakia], 21-25 August 2012. The author would like to thank all the participants at these conferences, especially James LeSage for valuable comments and suggestions.
Classification Codes: JEL C31, O18, O47, R11, R15
Divisions: Departments > Sozioökonomie > Wirtschaftsgeographie und Geoinformatik > Fischer
Depositing User: ePub Administrator
Date Deposited: 14 Dec 2015 13:51
Last Modified: 02 Sep 2020 15:44


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