The spatial dimension of innovation and growth: Empirical research methodology and policy analysis

Integrating space into economics by the "new economic geography" is a very recent development. However, the macro-economic role of spatial structure is not an issue with relevance for theoretical or empirical research only. Understanding it has potentially high importance for economic policy making as well. The debate in the European Union (EU) on the geographical distribution of Community Support Framework (CSF) assistance (i.e. efficiency or cohesion) is an excellent case in this respect. This paper serves three purposes. First, it provides a framework for empirical research of geographical growth. Second, based on this framework, it identifies problem areas of empirical research and suggests a set of methodologies to treat them. Third, it emphasizes that the framework can also drive development policy analysis. At the end an example is provided as to how decisions on regional allocation of EU CSF funds can be judged in relation to their likely macro-economic outcomes.