A space-time analysis of knowledge production

Abstract

Regional growth models often emphasize the importance of research and development activities leading to technological progress. The role of knowledge production and spatiotemporal spillover effects is investigated using a space-time panel data set covering 49 US states over the period 1994–2005. The aim is to test for the existence of regional knowledge spillovers in the context of a space-time dynamic suggested by the knowledge production function. A space-time specification is set forth that can be applied to panel data models that include random effects. We compare alternative models that have been proposed in the panel data literature to provide a better understanding of how new ideas diffuse across space and time. The results indicate that the space-time panel data set is consistent with the presence of strong spatiotemporal regional spillovers of knowledge. The empirical findings are interpreted in light of the existing theoretical and empirical literature on endogenous growth.