The spatial dynamics of growth and convergence in Korean regional incomes

We investigate whether the convergence hypothesis in 13 Korean regional economies for the period 1985 to 2011 exists allowing technological spillover and spatial interdependence. We use the spatial dynamic panel data approach including the spatial Durbin model. When we use the spatial lag model (SAM) with spatial fixed, we find that there is a positive spillover effect of growth among Korean regions and that convergence speed rate is faster than the model without spatial interdependence. However, when we use the SAM with time period fixed, or spatial fixed and time-period fixed effects, these results do not support convergence hypothesis of regional incomes. Therefore, we have to be careful to approach conclusion about convergence hypothesis in Korean regional incomes.