Spatial dynamics and growth rate volatility of European regions

Chapter 1: is the reproduction, with some extensions, of thepaper The Determinants of Growth Rate Volatility in EuropeanRegions. It is a joint work with Angela Parenti (IMTLucca,Italy) and Prof. Davide Fiaschi (University of Pisa, Italy).This paper investigates the determinants of growth rate volatility(GRV) of per capita GDP in a sample of 257 NUTS-2 Europeanregions in the period 1992 − 2008. An exploratory analysisshows a downward trend of GRV during the whole period,with the presence of three peaks in the cross section distributionin every year. Moran scatter plot highlights a clearspatial pattern of the GRV in 2008, confirming a geographicalclusterization of regions with higher and lower volatility.We propose a theoretical framework for the study of regionalGRV in presence of spatial dependence and wee applythe generalized spatial two stage least squares (GS2SLS)technique which allows to deal with both spatial dependenceand potential endogeneity of regressors. As determinantsof growth rate volatility, we explore the role played by thesize of the economy, output composition, fiscal policy, monetarypolicy and finally the effects of the European MonetaryUnion (EMU). Empirical results suggest that output compositionand the household expenditure on GDP have importantasymmetric effects on GRV. The size of the economy reducesthe volatility, while inflation increase the volatility only whenGRV is generated by negative shocks. A symmetric effect isfound for fiscal policy, where the government expenditure reducesvolatility due to both positive and negative shocks.Chapter 2: is the reproduction of the article An Index of GrowthRate Volatility: Methodology and Application to EuropeanRegions. It is a joint work with Irene Brunetti (University ofPisa, Italy), Angela Parenti (IMTLucca, Italy) and Prof. DavideFiaschi (University of Pisa, Italy).This paper proposes a novelmethodology tomeasure growthrate volatility by an index based on Markov matrices. This indexallows to control for the frequency of fluctuations, theirpersistence and size, and its addictive nature also permits toidentify the individual contribution of negative and positivefluctuations to overall volatility. The application of the proposedmethodology to a sample of 257 European regions belongingto the most of EU 27 countries for the period 1992-2008 shows that growth rate volatility displays a very significantspatial pattern, with the most volatile regions in the EasternEurope, Greece and Scandinavian countries, and with thehighest incidence of negative fluctuations in the Spanish andScandinavian regions. The economic size and the output compositionof regions are the main explanatory factors of theirgrowth rate volatility; but, weighting more large fluctuationsin the calculation of index, also regional investment rates andthe size of country domestic credit have some explanatorypower. Finally, the prevalence of negative fluctuations is explainedby regional investment rates and output composition.Chapter 3: is the reproduction of the article Local DirectionalMoran Scatter Plot. It is a joint work with Prof. Davide Fiaschi(University of Pisa, Italy) and Angela Parenti (IMTLucca,Italy).This paper identifies the presence of spatial clubs in a sampleof 254 European regions in the period 1991-2008 by a newmethodology based on nonparametric approach, and disentanglesthe contributions of spatial spillovers versus crossregionheterogeneity in their formation. In particular, threespatial clubs have emerged: one populated by regions belongingto the former Eastern Bloc countries, one by regionsof PIGS countries (Portugal, Italy, Greece and Spain) and thelast one by regions of other EU countries (notably Germany,France, UK and Northern Europe countries). A dynamic extensionof the Moran scatter plot, consisting in a non parametricestimate of the joint dynamics of GDP per worker andits spatial lag, suggests that in the long run the convergenceshould happen only to two spatial clubs with Eastern regionsconverging to PIGS regions. Spatial spillovers are presentacross European regions, and their contribution to the emergenceof spatial clubs is remarkable. Heterogeneity in humancapital has a very limited impact on the distribution of GDPper worker.