Regional Economic Convergence and Spatial Spillover Effects: Taiwan, 1991-2001

This research attempts to explore the regional economic convergence from spatial perspective. Using industry, commerce and service census and population and housing census data between 1991-2001, we investigate the effects of spatial spillovers on labor productivity growth with exploratory spatial data analysis and spatial econometric methods. The empirical results indicate three conclusions. First, the non-spatial models applied to analyze β-convergence suffer from a misspecification due to omitted spatial dependence. Second, there are α-convergence and β-convergence. Inequality of regional labor productivity between townships declined from 1991 to 2001. Poor townships displayed faster economic growth rates than wealthy ones. Last, the estimation results of spatial lag models indicate spatial spillover effects matter for regional economic growth. Regions can significantly benefit from high economic growth of neighboring regions.