Reassessing the validity of Verdoorn's law under conditions of spatial dependence: a case study of the Greek regions

Verdoorns Law implies that the process of growth is a cumulative one with the "manufacturing advanced" economies growing at the expense of their "less-advanced" counterparts. This paper tests a range of conventional and spatial specifications of Verdoorns Law across the Greek regions. The findings indicate that the law holds in the case of Greece and that the spatial models (and the spatial-error one, in particular) perform better than the conventional ones. The results indicate that, in the long run, the process of "cumulative causation " can and does slow down in favor of the less-advanced regions.