A continuous time model of European growth, integration and technology diffusion: The role of distance

• Published in: Economic modelling Vol. 26; no. 3; pp. 631 - 640
• Main Authors: Maggi, Bernardo, Padoan, Pier Carlo, Guerrieri, Paolo
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.05.2009; Elsevier; Elsevier Science Ltd
• Series: Economic Modelling
• Subjects: Continuous time econometrics; Continuous time econometrics Distance Growth Stability Sensitivity; Distance; Economic activity; Economic growth; Economic models; Europe; European Union; Growth; Innovation diffusion; Integration; Knowledge transfer; Non-linear models; Regional integration; Sensitivity; Stability; Studies; Technological change; Technology transfer; Europe; C33; Sensitivity; Stability; Growth; C62; O11; Continuous time econometrics; Distance
• ISSN: 0264-9993; 1873-6122
• DOI: 10.1016/j.econmod.2009.01.002

Economists have been devoting increasing attention to the diffusion process of knowledge in economic activities. However, the models till now developed concentrate mostly on the dynamics determined by the steady state, when dealing with the interaction among many countries. Instead, we present a non-linear model where explicitly formalize the disequilibrium as starting point. We evaluate theoretically and empirically, with a continuous time analysis applied to panel data, the integration process of some main European countries by considering a simultaneous interaction among output, technology and business services. In this process we take particular care of distance, as a strategic variable over time, and of the following consequences on the convergence to the steady state. On this subject we also show a closed form solution in presence of a linear constraint on technology among countries.