Growth and Technological Leadership in US Industries: A Spatial Econometric Analysis at the State Level, 1963-1997

1. Introduction

Economists have studied and debated economic growth and convergence for several
decades now. Explaining disparities between regions and countries usually in terms of
productivity levels has been at the center of the economic growth debate. Central to the
investigation is whether productivity growth across countries or regions is converging
(Dollar and Wolf 1993, Barro and Sala-i-Martin 1991, Rey and Montouri 1999, Islam 2003).
The early tradition of research focusing on cross-country analyses is progressively being
challenged by analyses at a lower level of spatial aggregation, such as counties in the US, or
Nuts-2 regions in the European Union (EU). Typically, many of these studies use spatial
econometric techniques, and focus on capturing the geographical dimension of growth and
productivity convergence. In addition, a seminal contribution by Bernard and Jones (1996)
initiated a discussion as to which sectors are driving the overall productivity convergence
result (Sorensen 2001, Bernard and Jones 2001). This paper therefore focuses on the issue
of space and technological leadership as determinants of economic growth, following up on
earlier studies showing that geographical and technological distance to the technology leader
has important implication in terms of productivity growth (Nelson and Phelps 1966,
Benhabib and Spiegel 1994).

In the US, many studies have focused on states and Metropolitan Statistical Areas
(MSA), and to some extent on counties in more recent years, as the spatial unit of
observation. Meanwhile sectoral disaggregate studies of economic growth at these levels of
spatial aggregation are few. Although technological leadership has been emphasized in cross-
country analyses of economic growth, little is known about regional determinants of
technology catch-up processes, and the extent to which “space” plays a role. It is largely
unclear to what extent geographical and/or technological proximity to the technology leader

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