The Importance of Trade and Geography in the Pattern of Spatial Dependence of Growth Rates.

The paper examines the nature of spatial dependence of growth rates across countries. Economic space as well as geographic space is considered as a possible medium through which growth rates may be correlated. The results indicate that the growth rates of developing countries are influenced by the lagged growth rates of their trading partners' growth rates. Industrialized countries' growth rates, on the other hand, display only contemporaneous correlation with others' growth rates that can be explained by the presence of time-specific global shocks. The conclusions seem consistent with a general model of North-South trade with endogenous knowledge-generated growth in the North and imitation, trade-driven growth in the South. Copyright 2002 by Blackwell Publishing Ltd