The impact of population on the reduction of steady-state disparities across Spanish regions

Abstract

Despite the abundant literature on convergence across the Spanish regions, most of the empirical research has used cross-section regressions or panel data techniques with fixed effects, resulting in biased estimates. Furthermore, many of these studies have not explicitly accounted for the effect of population changes in the convergence process. This paper attempts to overcome these limitations by applying a dynamic panel data model using the generalized method of moments system estimates for the seventeen regions of Spain during the 1955–2008 period. The main conclusion that stems from our analysis is that the deep reduction in steady-state disparities across Spain’s regions can be largely attributed to the differences in their population growth rates, which were mainly due to migration flows. In contrast, investment in physical capital, although it promoted convergence, played a minor role, while technology was a strong factor for divergence.