Using the spatial autoregressively distributed lag model in assessing the regional convergence of per-capita income in the EU25

The present study investigates the spatially dynamic income process among 228 regions of the extended European Union 25 on the basis of the augmented Solow model. In particular spatial autocorrelation effects are taken into account. Although a lot of empirical work has been done recently on the convergence process in EU, the importance of pure spatial interactions is still largely underestimated. In this paper a spatially dynamic approach is considered to describe the driving forces present in the economic system rather than the actual movements through time. The spatial error-correction and other related models are presented and used to explain the process of regional convergence observed at the level of the EU25 NUTS 2 regions in 2004.