Incorporating Technology Diffusion, Factor Mobility and Structural Change into cross-region Growth Regression: An Application to China

Abstract

This paper advocates a spatial dynamic model that introduces technology diffusion, factor mobility, and structural change into the cross-region growth regression. The spatial setting is derived from theory rather than spatial statistical tests. An application of this model to the study of cross-province growth in China over the period 1980-2005 indicates that incomes are spatially correlated, which highlights the significance of technology diffusion and factor mobility. Furthermore, the integration of neoclassical growth empirics and the structural change perspective of development economics provides a much improved account of inter-provincial variations in income levels and economic growth.