Spatial-Temporal Modeling for Regional Economic Development: A Quantitative Analysis with Panel Data from Western China

The objective of this research is to analyze regional economic difference and explore the influencing factors, which would eventually provide an effective foundation to narrow the regional economic differences. In this paper, a new regional economic difference model is established considering the interactions between the spatial weight and human capital and foreign direct investment (FDI). With the panel data from twelve western provinces in China, the empirical research is conducted by adopting feasible generalized least squares (FGLS) fixed effects model. The preliminary results show that: (1) the spatial spillover effect of human capital and FDI is significant to the formation of regional economic difference; and (2) the total capital formation, government expenditure, FDI, human capital and patent application authorization are positively correlated with GDP growth per capita, while the number of medical institutions is negatively correlated with GDP growth per capita. In addition, the robust test is carried out for validation by using the filter variable method, spatial lag model and spatial error model. The robustness test results show that the results of the FGLS fixed effects model are validated by the filter variable method. The other two robust test results show that: (1) the total capital formation and the fixed asset investment is of 99.9% significance, which represents that they play a key role in the formation of economic development difference; and (2) the coefficients' symbols of the other variables are consistent with the FGLS fixed effect model but a little different on the significances, which enhance the effectiveness of the proposed regional economic difference model.