Productivity convergence and spatial dependence among Spanish regions

This paper estimates the evolution of labor productivity disparities among 48 Spanish regions over 1980-1996 according to the concepts of βand σ-convergence and emphasizes the importance of including both spatial effects and a disaggregate analysis at a sectoral level. Various recent contributions have tested the origin of productivity differentials among regions in Europe (Esteban, 2000; Maudos et al., 2000; Cuadrado-Roura et al., 1999, among others). However, despite the literature focusing on the essential role of spatial dependence, the impact of neighboring locations’ productivity has not been widely investigated. The results display that spatial effects vary from one sector to another and βconvergence in labor productivity is greater at the aggregate level than at the level of agriculture and industry, but not of services. When σ -convergence is examined in order to measure the narrowing of inequalities, it reveals that convergence occurs in aggregate labor productivity but not in productivities by sector. The reason comes from a transfer of resources from agriculture towards more productive sectors that has been more pronounced in the poor regions than in the rich ones. § The author would like to thank Julie Le Gallo for her valuable comments.