Growth spillover: a spatial dynamic panel data and spatial cross section data approaches in selected Asian countries

(2020) 6:20 Amidi et al. Futur Bus J https://doi.org/10.1186/s43093-020-00026-9 Future Business Journal Open Access RESEARCH Growth spillover: a spatial dynamic panel data and spatial cross section data approaches in selected Asian countries Sahar Amidi1*, Ali Fagheh Majidi2 and Bakhtiar Javaheri2 Abstract One of the most fundamental issues worldwide is the economic interdependence of countries which affects their economic growth. Some new growth theorists such as Mankiw et al., Islam, Ertur and Koch, Lee, Yu and Yu Ho et al. consider geographical proximity and trade as spatial variables. This study aims to investigate the spatial effects of geographical distance on economic growth using the spatial dynamic panel data model and the spatial cross section data model for the period 1992–2016 in selected Asian countries. The findings demonstrate that the effect of spatial spillover or spatial dependency is one of the main causes of economic growth spillovers. In the spatial dynamic panel data model, log of gross domestic product (GDP), gross fixed capital formation and growth rate of labor force had negative, positive and negative impacts on economic growth, respectively. In the spatial cross-sectional data models including human capital, log of GDP, gross fixed capital formation and growth rate of labor force had negative impacts on economic growth, while in a model without human capital log of GDP, gross fixed capital formation and growth rate of labor force, respectively, had positive and negative effects on economic growth. Keywords: Economic growth, Spatial econometrics, Spillover effects, Human capital, Asia JEL Classification: C21, O47, O53, R11 Introduction Economic growth and its determinants are fundamental for every country. Therefore, it is essential to study the influences of economic growth from different angles. Branches of economics dealing with the analysis of economic growth category, its causes and developments in geographical space have been essential topics of economics. Hence, it is necessary to unify geography and new growth theory, or at least to develop some junction models. The standard neoclassical economic growth model was developed by [30, 31] in the 1950s. In that model, the saving rate and the Malthusian labor growth are exogenously given. Solow proposed a new analysis of growth model that is in many ways consistent with the *Correspondence: ‑orleans.fr 1 Universite D’Orleans, 45000 Orléans, France Full list of author information is available at the end of the article neoclassical growth model. The Solow–Swan model is believed to show how the growth of capital stock, growth in the labor force and progress in technological interactions affect a nation’s total output. The model illustrates supply of goods based on a production function of constant returns to scale, the diminishing returns of the scale of each factor of production and substitution between the factors. These functions are combined with the constant rate of payback and create a general equilibrium model [1]. Labor grows at a constant rate, the level of technology and savings rate are constant over time, and capital depreciates at a positive constant rate (that is, at each point in time, a constant fraction of the capital stocks wear out and therefore can no longer be used for production). In each second, the capital stock is a key determinant of the economy’s output, but the capital stock can alter and this can lead to economic growth. Since Solow and Swan’s theory was developed, a vast body of © The Author(s) 2020. 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Futur Bus J (2020) 6:20 literature has been written on growth theory and different generations of models have been considered (see, for example, [6]). This paper firstly examines the neoclassical Solow–Swan hypothesis (does not include human capital) that considers geographical proximity and secondly investigates the spatial Solow model that includes human capital. The main conclusion of the Solow model is that the accumulation of physical capital cannot explain the extraordinary growth in per capita production or the geographical differences of per capita production. Suppose that the accumulation of productive capital is affected by the conventional channel, that is, capital has a direct contribution to production, which is equal to its final return value. In this case, according to the Solow model, the differences in per capita production are much greater than those that can be explained by the capital input. Different regions of the world are influenced by knowledge and technology spillover, communication, production and trade mobility factors which are not taken into consideration by the neoclassical growth model of Solow and Swan. Furthermore, empirical research on the regional development process does not take into consideration an area independent of adjacent regions because according to the first geographical law of Tobler [32] any location depends on a location and the places that are closer have the greatest impact on each other than places farther away; indeed, countries are complex in nature involving economic, social and spatial characteristics. Hence, it is necessary to incorporate the spatial dependence into any of our econometric models; therefore, the relationship between countries in the context of spatial dependence should be considered. In the Solow spatial model, knowledge of capital is included and capital comprises of a broad concept of both the physical and human. The finding of the current study is particularly important for governments to better understand the role of determinants on economic growth. This paper is organized as follows: the introduction is outlined in the “Introduction” section, and “Review of literature and empirical studies” section presents the spatial growth model, the spatial weight matrix and the proposed hypotheses tests. “Methods” section includes the methodology and data. “Analysis” section discusses the estimation results, and “Results and discussion” and “Conclusions” sections conclude with some policy implications. Review of literature and empirical studies Nowadays, (...truncated)