Dynamic effects within a regional system: An empirical approach

In this paper we focus on the dynamic effects under which the regional economic growth processes are accomplished, breaking them down into two broad types: neighborhood and economy-wide effects. By means of a proposed dynamic space - time empirical model, the competition structure within a multiregional economic system is developed. Cointegration and error-correction modeling techniques are used to support the existence of this competition structure over both the short and long term. As an application, we show the dynamic effects on the evolution of the regional performance of Spanish regions over the period 1972 - 2000. Our results indicate that some macroeconomic forces are operating through time on this Spanish system because positive and negative effects are detected both at economy-wide and at neighborhood levels. Further, the findings show that a new taxonomy of the Spanish regions could provide some guidance for the development of appropriate measures for regional economic policy.