European Urban Growth: Now For Some Problems of Spaceless and Weightless Econometrics

This paper investigates growth differences in the urban system of the EU12 for a data set relating to Functional Urban Regions comparing the results of ‘artisanal’ methods of model selection with those obtained using general to specific model selection with PcGets. The artisanal approach tests hypotheses relating to the role of human capital, EU integration and fragmentation of urban government. The paper also explores issues of spatial dependence and mechanisms of spatial interaction. Using PcGets as suggested by Hendry and Krolzig (2004) to optimise model selection we find that while PcGets provides a powerful tool for model selection when applied to cross sectional data, caution is necessary to ensure that variables relating to spatial adjustment processes are included and spatial dependence is avoided. More generally, not only do the results provide consistent estimates of parameters but they also support relevant theoretical insights. Finally careful testing for spatial dependence reveals that national borders are still significant barriers to adjustment within the EU.