Exploring regional economic convergence in Romania. A spatial modeling approach

This paper explores spatial economic convergence in Romania, from the perspective of real GDP/capita, and examines how the shock of the recent economic crisis has affected the convergence process. Given the presence of spatial autocorrelation in the values of GDP per capita, we address the question of convergence in terms of both classic and spatial regression models, thus filling a gap in the Romanian literature on this topic. The empirical results seem to provide support for both absolute and relative beta divergence in GDP/capita, as well as sigma divergence among Romanian counties on the long run. This is the consequence of the two-speed regional development, with the capital region and some large cities thriving by attracting human capital and FDIs, while the lagging regions are systematically left behind. Failing to validate the neoclassical approach on convergence, our results rather support the new divergence theory based on polarization and centre-periphery inequality.