A spatial econometric analysis of the regional growth and volatility in Europe

Based on a sample of 1,084 European regions (EU15) from 1995 to 2004, we estimate the relationship between the average growth rate of GDP per capita and the volatility of the growth rate allowing for spatial effects. The spatial lag and spatial error models show that the regional per capita growth rate and volatility are significantly positively related on average. However, the inclusion of country interaction terms reveals that the volatility impact is not uniform across countries. In particular, the relationship between growth and volatility is significantly positive for the majority of countries but significantly negative for three countries (namely Finland, Italy, and Ireland). © Springer Science+Business Media, LLC. 2008.