Sascha Sardadvar

Structure of the Model

To include the relative location in space in a growth model means that an economy’s performance no longer lies solely within its range and conditions, but rather also depends on developments and decisions made beyond its borders. This chapter lays out the study’s model, which can be described as a growth model of N regional economies with a neoclassical production function that includes human capital, and where physical capital mobility between regional economies takes place. The configuration of the model, that incorporates both N regional economies and their accompanying superordinate economy is presented in Sect. 6.1. Section 6.2 examines specific characteristics of the neoclassical production. Finally, the key equations of the evolution of factors of production are discussed in Sect. 6.3.

How Migrant Status Affects Health Beyond Socioeconomic Status: Evidence from Austria

The debate on health inequalities usually focuses on the interplay between socioeconomic status (SES) and health, where it is widely accepted that the former influences the latter. However, little is known on whether the influence of SES on health is sufficient to explain the observed lower health statuses among various migrant groups in European countries. This paper presents a model that integrates the influences of SES and migrant status on health and tests its implications empirically for Austria. Several ordered logit regressions are performed, whose results show that particular migrant groups are disadvantaged with respect to health. In addition, the overall influence of migrant status on health is considerably stronger for women than for men, while health status of men is influenced by interactions between migrant status and occupational status.

Convergence: Theory and Evidence

Considerations on growth theory inevitably raise the question of whether different economies converge to each other in terms of output, income, or related measures. Interest in cross-country disparities of wealth and their causes is omnipresent in international politics. In fact, the issue has become so important that it is now officially a major objective of the European Union, as discussed in the Introduction. Although there exist various definitions of what constitutes convergence, this study will refer to just one definition of convergence, which combines two concepts:

Neoclassical Growth Theory and Standard Models

Thoughts and theories on economic growth can be traced back to the classical economists of the eighteenth and nineteenth century, whose works are briefly reviewed alongside the transition to neoclassical growth theory in Sect. 2.1. The basic outline of neoclassical growth models as first developed by Solow (1956) and Swan (1956) is presented in Sect. 2.2. The familiar but nonetheless special case of a Cobb-Douglas production function is examined in Sect. 2.3 in connection with the derivation of steady state levels of factors of production and output. Finally, Sect. 2.4 examines the inclusion of human capital as an additional factor of production and provides a note on endogenous growth theory.

Spatial Econometric Specification and Estimation

The theoretical model laid out in Part II can be directly translated to a spatial econometric model specification, with output growth as the dependent variable, and two explanatory variables, which are also lagged in space, thus making a total of four independent variables, and in addition there are a constant and a spatially correlated term. The method of ordinary least squares would cause inefficient results in such a specification, but estimation using the method of maximum likelihood overcomes this problem.

Evolution of Factors and Output

The purpose of this chapter is to discuss the dynamic developments of the model presented in the previous chapter. In Sect. 7.1, the model’s long run solutions are derived, and it is shown that under the given assumptions, all regions converge to the same stable output levels in the long run. An eventual outcome, possibly beyond our lifetimes, may be of limited interest; for this reason, a number of medium run scenarios of regional growth are discussed comprehensively in Sect. 7.2. The model makes clear predictions concerning mutual interdependence, initial output levels and stocks of capital, which are derived formally in Sect. 7.3.

Testing the Theoretical Model

The final chapter is devoted to tests of the theoretical model using European data for the observation period 1995–2004. They show how a fixation on the incidence of convergence processes may in fact distract from persistent and widening disparities: after presenting the results from tests of the theoretical model, it is demonstrated how these are related to divergence tendencies within subgroups of regions.

Regions, Variables and Data

The aim of this chapter is to find and discuss the data that fit the assumptions of the theoretical model within Europe, as well as to present some noteworthy statistics. Section 9.1 explores the European integration process, while Sect. 9.2 discusses the appropriate variable selection. Section 9.3 presents an explorative analysis and some initial conclusions that accompany the subsequent econometric analysis.

Implications for Output Growth

In this chapter, the theoretical model is translated into an econometrically testable linear expression. In Sect. 8.1, it is shown how a Taylor approximation of the production function’s derivative with respect to time results in a differential equation, the solution of which is given in Sect. 8.2: after a considerable number of equations, the model’s complexities are reduced into one linear equation with clear conclusions. Finally, in Sect. 8.3, the model’s implications are summarised in connection with an outlook to possible extensions and future research.

Growth Models with Spatial Externalities

Although it is widely acknowledged that interaction between economies has a decisive impact on economic development, there have so far been only a handful of attempts to implement space into theoretical models of economic growth, two of which are discussed in what follows: Sect. 3.1 presents a model that examines the incidence of knowledge spillovers from neighbouring regions within the framework of the Solow model. In Sect. 3.2, a spatial enhancement of the Solow model for N economies is reviewed, along with a brief discussion of approaches that refer to the Verdoorn Law.