Geographical competition between regional economies: The case of Spain

Abstract

The purpose of this paper is to suggest an approach to uncover the patterns of geographical competition and complementarity in a regional economic system; a model for practical analysis is developed by means of a cointegration econometric modeling framework. It is claimed that this model is a suitable approach to identify the kind of relationships between adjacent regional economies, to undertake exploratory analysis, and to analyze situations with limited information about the nature of regional relationships. The utility of the analysis stems from the absence, in most regional development policy formulation, of explicit consideration of spatial spillovers. The paper is organized as follows. In order to establish the basis for the regional problem to be analyzed, some issues that connect with the spatial interaction of the regions will be presented in Sect. 2. Section 3 is devoted to theoretical considerations of long-term regional evolution and regional competition; and the way in which the error correction mechanism models can be introduced into this context. In Sect. 4, a model for assessing horizontal relationships between adjacent regions is developed using the Engle-Granger procedure. The results of the macroeconomic competition and macroeconomic complementarity between the Spanish regions are presented in Sect. 5; the sixth section evaluates the adopted approach, showing its advantages, disadvantages and limitations. Finally, some concluding comments comprise Sect. 7. 2. Competition and complementarity: The regional problem in context The field of regional competition can be tackled from many different perspectives, and it is necessary to establish a framework to carry out an organized, convenient discussion. The relevant spatial dimension of our analysis is placed at in the level II of the Nomenclature of Territorial Units for Statistics (referred to by the French acronym NUTS) that divides the territory of the European Union into 211 regions. The European Commission uses a spatial classification established by Eurostat on the basis of national administrative