Slow convergence? The new endogenous growth theory and regional development

In economics, interest has revived in economic growth, especially in long-term convergence in per capita incomes and output between countries. This mainly empirical debate has promoted the development of endogenous growth theory, which seeks to move beyond conventional neoclassical theory by treating as endogenous those factors-particularly technological change and human capital-relegated as exogenous by neoclassical growth models. The economists at the forefront of the formulation of endogenous growth theory and the new growth empirics have begun to use long-term regional growth patterns to test and develop their ideas. Their analyses suggest that regional convergence is a slow and discontinuous process. In this paper we consider whether endogenous growth theory can help to explain this finding. We argue that endogenous growth theory has important regional implications, but also major limitations when applied to a regional context.