Growth spillover through trade: A spatial dynamic panel data approach

This paper empirically examines the international spillover of economic growth through bilateral trade. We extend the Solow growth model with a spatial autoregressive term and a spatial time lag term, and estimate such a model with a sample of 26 OECD countries over the period 1971-2005. We find that there is a positive spillover effect of growth from one country to its trade partners. The implied rate of convergence is higher after including the spatial terms. (C) 2013 Elsevier B.V. All rights reserved.