Handbooks of Research Methods and Applications series
Edited by Charlie Karlsson, Martin Andersson and Therese Norman
Neoclassical ‘exogenous’ growth models predict that, under certain conditions (complete markets, free entry and exit, negligible transaction costs and convex technology relative to market size), economies navigate a sea of economic opportunities that reward productive efforts and savings (Solow, 1956; Swan, 1956; Borts, 1960; Borts and Stein, 1964; Barro and Sala-i-Martin, 1995). Thus initially low-income economies typically do not entrap and tend to catch up; only those economies that do not make investments will not escape the low-income status quo. However, the stylized facts observed for regions, especially for European regions, tell us a different story, that is a story of lack of global convergence, club convergence and strong spatial interdependence (Basile, 2009; Fiaschi and Lavezzi, 2007; Fotopoulos, 2008). These stylized facts have led scholars to question the explanatory power of neoclassical exogenous growth models and to look at endogenous growth theories as suitable frameworks to interpret the actual regional development, in Europe as well as in other contexts.
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