Economic prosperity is unevenly distributed across geography, even within national boundaries. As national incomes converge, many subnational areas within countries show widening disparities. Much of the evidence of subnational growth is hampered by inadequate attention to the spatial clustering of economic development.
We seek to explain the determinants of subnational growth by taking into account possible neighborhood and spillover effects whereby growth and development are influenced by growth rates in proximate geographic areas.
Using data from around 3,000 first-level, subnational areas across 169 countries, we find that spatial autocorrelation is a critical factor in explaining growth at the subnational level. We also find that certain characteristics of these areas affect growth independently of national economic policy, including soil suitability for agriculture and malaria ecologies. We also show that legacies of conflict exert a consistent, negative effect on subnational growth. Our findings carry implications for identifying and for spatial targeting of poverty hotspots.