This paper introduces technological interdependence into the theoretical framework of Gennaioli et al. (Quarterly Journal of Economics 2013; 128: 105-164). This extension leads to an expression for regional development with spatial effects that motivates the incorporation of the geographical dimension into their newly constructed database and empirical analysis. Our estimation results corroborate both the necessity of accounting for the presence of spatial dependence to study the determinants of regional income per capita and the importance of educational attainment in explaining regional development differences. Furthermore, we provide evidence that human capital generates positive spatial spillovers.
