Région et Développement n ° 27-2008

Abstract- The literature on economic development has been divided as to the nature of the relationship between inequality and growth. Recent exploratory work in the field has provided evidence that the dynamic and spatial relationships between the two may be far more complicated than previously thought. This paper provides an spatial econometric specification for the analysis of economic growth, that allows for simultaneity as it relates to inequality. Furthermore, attention is given to the possible impacts of local clustering on the performance of individual economies in a global setting. The new methodology is applied to the US states from 1969–2000, where the counties are used for the local inequality and clustering estimates