Knowledge Spillovers, Spatial Dependence, and Regional Economic Growth in U.S. Metropolitan Areas by Up Lim, B.A., M.C.P. DISSERTATION Presented to the Faculty of the Graduate School of The University of Texas at Austin in Pa.rt.ial Fulfillment. of the Requirements for the Degree of DOCTOR OF PHILOSOPHY THE UNIVERSITY OF TEXAS AT AUSTIN December 2003 v
Table of Contents Acknowledgments Abstract List of Tables List of Figures v viii xv xvi Chapter 1. Introduction 1 1.1 Problem Statement 1 1.2 Researeh Objectives (i 1.3 Contributions 9 1.4 Organization of the Study 11 Chapter 2. Theoretical Underpinnings: Knowledge Externalities and Increasing Returns in the Growth Process 14 2.1 Introduction 14 2.2 Classical Origins 16 2.3 Neoclassical Growth Theory 18 2.4 Increasing Returns and the Process of Cumulative Ca.usa.tion. 22 2.5 Increasing Returns and Endogenous Growth Theory 25 2.0 Evolutionary Theory of Technological Change and Economic Growth.. ' ' 28 2.7 Concluding Remarks 31 Chapter 3. Spatial Data, Spatial Externalities, and Spatial Econometric Methods 35 3.1 Introduction 35 3.2 Spatial Dependence and Spatial Econometric Analysis 37 3.2.1 Why Spatial Econometric Analysis? 37
3.2.2 Modeling Space: Spatial Weights Matrices 38 3.2.3 Spatial Lag of a. Variable 41 3.3 Spatial Econometric Models 42 3.3.1 A Taxonomy of Spatial Regression Models 42 3.3.1.1 The spatial lag model 43 3.3.1.2 The spatial error model 44 3.3.1.3 The spatial cross-regressive model 45 3.3.2 Maximum Likelihood Estimation 40 3.3.2.1 ML estimation in the model with a spatially lagged dependent variable 47 3.3.2.2 ML estimation in the model with spatial autoregressive error terms 49 3.3.2.3 Concluding comment 50 3.3.3 Instrumental Variables or Spatial Two-Stage Least Squares Estimation 51 3.3.4 Generalized Method of Moments Estimation 52 3.4 Tests for Spatial Dependence 54 3.4.1 Moran's / Test 54 3.4.2 Maximum Likelihood Based Tests 55 3.5 Concluding Remarks 57 Chapter 4. The Spatial Distribution of Innovative Activity 58 4.1 Introduction 58 4.2 The Evolutionary Nature of Technological Change and Its Economic Geography GO 4.2.1 The Nature of Knowledge as an Input of Innovation.. 01 4.2.2 The Nature of Innovation and Its Geographic Context. 02 4.2.3 The Nature of Technological Regimes and Its Geographic Context. 04 4.2.4 The Discontinuous Nature of Technological Change and Its Geographic Context 00 4.3 Basic Analysis of Spatial Patterns of Innovation G7 4.3.1 Data 07 4.3.2 The Spatial Distribution of Innovative Activity 70
4.3.3 The Spatial Concentration and Cunmlativeness of Innovative! Activity 70 4.4 Exploratory Spatial Data. Analysis 84 4.4.1 The Spatial Weights Matrix 84 4.4.2 Moran's / Statistic 87 4.4.3 Moran Scatterplot 88 4.4.4 Exploratory Spatial Data Analysis Results: The Space- Time Evolution of Innovative Activity 89 4.5 Concluding Remarks 97 Chapter 5. Knowledge Spillovers, Agglomeration Economies, and the Geography of Innovative Activity 101 5.1 Introduction 101 5.2 Knowledge Spillovers and the Geography of Innovative Activity 104 5.2.1 Knowledge Spillovers and Agglomeration Economies.. 104 5.2.2 Empirical Findings on Knowledge Externalities and the Geography of Innovative Activity 100 5.3 Spatial Econometric Model Specifications 109 5.3.1 Base Model Specification 110 5.3.2 Spatial Lag Model Specification 113 5.3.3 Spatial Error Model Specification 115 5.3.4 Spatial Cross-Regressive Model Specification 117 5.4 Empirical Results 118 5.4.1 Definition of High Technology Industry 118 5.4.2 Estimation Results 119 5.4.2.1 The base model 120 5.4.2.2 The spatial lag model 122 5.4.2.3 The spatial cross-regressive model 124 5.5 Concluding Remarks 128 Chapter 6. Knowledge Spillovers and Regional Economic Growth and Convergence 130 0.1 Introduction 130 0.2 Empirical Findings on Knowledge Spillovers and Regional Economic Growth and Convergence 133
0.3 Econometric Modeling Frameworks, 137 0.3.1 Metropolitan Economic Growth Model Specification.. 138 0.3.2 Metropolitan Economic Convergence Model Specification 141 0.4 Variable Description and Exploratory Spatial Data Analysis. 142 0.4.1 Data and Description of the Variables 142 6.4.2 Exploratory Spatial Data Analysis 140 6.5 Spatial Econometric Analysis and R.esults 147 0.5.1 The Non-Spatial Regression Models 147 0.5.2 The Spatial Lag Model 153 0.5.3 The Spatial Cross-Regressive Model 158 0.6 Concluding Remarks 100 Chapter 7. Conclusions 163 7.1 Summary and Key Findings 103 7.2 Policy Implications 108 Appendices 171 Appendix A. Appendix to Chapter3 172 A.I Statistical Properties of Ordinary Least Squares Estimation in Spatial Dependence Models 172 A.1.1 OLS estimation in the presence of a. spatially lagged dependent variable 172 A.1.2 OLS estimation in the presence of spatial residual autocorrelation 174 A.2 Generalized Instrumental Variables or Spatial Two-Stage Least Squares Estimation 175 Appendix B. Appendix to Chapter 4 180 B.I Spatial Association Patterns for Innovative Intensity 180 Appendix C. Appendix to Chapter 5 184 C.I High Technology Industries 184 C.2 Estimation R.esults for Metropolitan Innovative! Activity... 180
Appendix D. Appendix to Chapter 6 187 D.I Moran Scatterplots for Log Per Worker Income. 1990 and 1999 187 D.2 Moran Scat.terplot Maps for Log Per Worker Income. 1990 and 1999 189 D.3 Estimation R.esults for Metropolitan Per Worker Income Growth 192 Bibliography 193 Vita 214