Regional growth in Western Europe : an empirical exploration of interactions with agriculture and agricultural policy

Abstract

Studies of convergence of regional growth in Western Europe have given varying results, depending on the addition of conditioning variables and estimation methods, as well as underlying models. This exploration adds agricultural variables to the basic convergence model, which suggests that initially poorer regions grow faster than initially more wealthy regions. Subsidising agriculture may be expected to impact growth in different ways than initial gross value added per capita. We find some support for our hypothesis that agricultural support has a negative impact on convergence. The coefficients have the right sign and are significant or nearly significant, but the results of both the basis model and our augmented model may be subject to other mis-specification problems, possibly including non-stationarity, even after including the spatially lagged dependent variable. This is examined using geographically weighted regression.