Spatial interaction and economic growth: a case of OECD countries

Abstract

The Solow residual has presented an opportunity to researchers who have been attempting to explain the unexplained share of output. In pursuing this goal, the literature has relied on different models, estimators, and data sets. One such application is spatial models to estimate growth, but it remains rare in the literature. Such models allow us to determine whether the interaction among countries is significant. Additionally, it is possible to observe efforts to mimic different variables among countries thanks to indirect (spillover) effects. Therefore, using spatial models and data sets on founding OECD countries for the period 1996-2019, this article tests alternative weight matrices to clarify the mutual relationship among countries. The findings reveal that spatial models contribute to estimations by improving parametric results. Empirical evidence found that there are spatial interactions among countries. The spillover effect of technology growth is insignificant, while the direct effect is significantly positive. Investment growth is significantly positive except spillover effect. Human capital growth is significantly positive in any sense.