We investigate the sources of convergence across the Spanish regions. We develop and estimate a descriptive growth model that allows for factor accumulation, technological diffusion, rate effects from human capital and unobserved regional factors. Our results indicate that technological catch-up, the equalization of educational levels and the redistribution of employment across regions account for most of the observed reduction of regional disparities. We also find that there remain very significant cross-regional differences in estimated TFP levels that point to the omission of important variables and to the need for a more disaggregated analysis. © 2002 Elsevier Science B.V. All rights reserved.

This paper was written as part ofa research project cofinanced by the European Regional Development Fund and Fundación Caixa Galicia. Financial support from the Spanish Ministry of Education (through DGICYT grants nos. PB95-130 and SEC99-1189) is also gratefully acknowledged.

Peer Reviewed