| Abstract: | Theoretical economic geography has received significant newimpetus from so-called ‘new economic geography’theory, and this provides the basis of the spatial econometricmodel developed in this paper. The model, which is seen as partof an attempt to bridge the gap that presently exists betweenthis new body of theory and reality, is fitted using 3SLS todata on manufacturing productivity growth data for 178 regionsof the EU covering the periods 1975–81, 1981–89,1989–95. The resulting estimates point to the continuedexistence over time of increasing returns, and thus providessupport for one of the main tenets of new economic geographytheory. The results also highlight urbanization, peripherality,the initial level of technology and across-region spilloversas determinants of regional productivity growth variations,operating via the rate of technical progress and labour efficiencyvariations. There is no evidence that these variables are diminishingin significance systematically over time, leading to the conclusionthat spatial polarization in productivity will persist. Thepaper points to the need for further testing of fundamentalassumptions of the underlying theory, and for developments inthe theory to accommodate interdependence between model parametersand the socio-economic context within which the process is operating. |
