Metropolitan economic growth and spatial dependence: Evidence from a panel of China

There are a number of theoretical reasons why cities interact with each other. Such spatial interdependence has been largely ignored by the empirical literature with only a couple of recent papers accounting for such issues in their estimation. This paper takes spatial dependence panel data models in specifying and testing to analyze three metropolitan growth behaviors in China. We find that controlling for fixed-effects allows us to disentangle the effect of spatial dependence from that of spatial heterogeneity and that of omitted variables. The estimated relationships of traditional determinants of urbanization are robust to inclusion of terms to capture spatial interdependence, even though such interdependence is estimated to be significant. Additionally, the three metropolitan areas might be said to represent three distinct stages during the urbanization of China.