Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/euf/ecopap/0229.html
   My bibliography  Save this paper

The dynamics of regional inequalities

Author

Listed:
  • Salvador Barrios
  • Eric Strobl
Abstract
This paper analyses empirically the dynamics of regional inequalities in GDP per capita. Our starting hypothesis is that the evolution of regional inequalities should follow a bell-shaped curve depending on the level of national economic development. A number of authors going from Kuznets (1955) to Lucas (2000) have provided extensive theoretical arguments along this line suggesting that growth, because of its very nature, is unlikely to appear everywhere at the same time. Regional inequalities should then rise when countries start developing and then fall once a certain level of national economic development is reached as long as spillovers are strong enough to transmit growth and technological progress across regions. We test empirically these predictions by using regional data for a panel of European countries and by making use of semi-parametric estimation techniques. Our results provide strong support for a bell-shaped curve in the relationship between the national GDP per capita level and the extent of regional inequalities independently of the time period and regional administrative units considered. The nature of this non-monotonic relationship is not altered by the inclusion of other possible determinants of regional inequalities. A number of policy implications are derived from our results.

Suggested Citation

  • Salvador Barrios & Eric Strobl, 2005. "The dynamics of regional inequalities," European Economy - Economic Papers 2008 - 2015 229, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0229
    as

    Download full text from publisher

    File URL: https://ec.europa.eu/economy_finance/publications/pages/publication634_en.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Davies, Sara & Hallet, Martin, 2002. "Interactions between National and Regional Development," Discussion Paper Series 26187, Hamburg Institute of International Economics.
    2. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
    3. Iimi, Atsushi, 2005. "Decentralization and economic growth revisited: an empirical note," Journal of Urban Economics, Elsevier, vol. 57(3), pages 449-461, May.
    4. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-954, July.
    5. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
    6. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    7. Kim, Sukkoo & Margo, Robert A., 2004. "Historical perspectives on U.S. economic geography," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 66, pages 2981-3019, Elsevier.
    8. Quah, Danny, 1997. "Empirics for growth and distribution," LSE Research Online Documents on Economics 2138, London School of Economics and Political Science, LSE Library.
    9. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    10. Angel de la Fuente, "undated". "The effect of Structural Fund spending on the Spanish regions: an assessment of the 1994-99 Objective 1 CSF," Working Papers 2003-11, FEDEA.
    11. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-1069, July.
    12. Durlauf, Steven N & Johnson, Paul A, 1995. "Multiple Regimes and Cross-Country Growth Behaviour," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 365-384, Oct.-Dec..
    13. Jones, Charles I., 2005. "Growth and Ideas," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 16, pages 1063-1111, Elsevier.
    14. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    15. Bruno, Giovanni S.F., 2005. "Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 87(3), pages 361-366, June.
    16. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, April.
    17. Paul Cheshire & Stefano Magrini, 2000. "Endogenous Processes in European Regional Growth: Convergence and Policy," Growth and Change, Wiley Blackwell, vol. 31(4), pages 455-479.
    18. Clark, Todd E. & van Wincoop, Eric, 2001. "Borders and business cycles," Journal of International Economics, Elsevier, vol. 55(1), pages 59-85, October.
    19. A Rodríguez-Pose, 1996. "Growth and Institutional Change: The Influence of the Spanish Regionalisation Process on Economic Performance," Environment and Planning C, , vol. 14(1), pages 71-87, March.
    20. Davies, Sara & Hallet, Martin, 2002. "Interactions between national and regional development," HWWA Discussion Papers 207, Hamburg Institute of International Economics (HWWA).
    21. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, C.E.P.R. Discussion Papers.
    22. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    23. Xie, Danyang & Zou, Heng-fu & Davoodi, Hamid, 1999. "Fiscal Decentralization and Economic Growth in the United States," Journal of Urban Economics, Elsevier, vol. 45(2), pages 228-239, March.
    24. Fabio Canova, 2004. "Testing for Convergence Clubs in Income Per Capita: A Predictive Density Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 49-77, February.
    25. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
    26. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(2), pages 284-314, June.
    27. Eijffinger, S.C.W. & Beugelsdijk, S., 2003. "The Effectiveness of Structural Policy in the European Union : An Empirical Analysis for the EU-15 During the Period 1995-2001," Other publications TiSEM b49148f9-6d69-49ac-93c1-1, Tilburg University, School of Economics and Management.
    28. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    29. Durlauf, Steven N., 2001. "Manifesto for a growth econometrics," Journal of Econometrics, Elsevier, vol. 100(1), pages 65-69, January.
    30. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE.
    31. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796, Elsevier.
    32. Ottaviano, Gianmarco & Thisse, Jacques-Francois, 2004. "Agglomeration and economic geography," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 58, pages 2563-2608, Elsevier.
    33. Bottazzi, Laura & Peri, Giovanni, 2003. "Innovation and spillovers in regions: Evidence from European patent data," European Economic Review, Elsevier, vol. 47(4), pages 687-710, August.
    34. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
    35. George Petrakos & Yiannis Saratsis, 2000. "articles: Regional inequalities in Greece," Papers in Regional Science, Springer;Regional Science Association International, vol. 79(1), pages 57-74.
    36. Richard Blundell & Alan Duncan, 1998. "Kernel Regression in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 62-87.
    37. Li, Q. & Wang, Suojin, 1998. "A simple consistent bootstrap test for a parametric regression function," Journal of Econometrics, Elsevier, vol. 87(1), pages 145-165, August.
    38. Karen Helene Midelfart-Knarvik & Henry G. Overman, 2002. "Delocation and European integration: is structural spending justified? [‘Specialization patterns in Europe’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 17(35), pages 321-359.
    39. Tamura, Robert, 1996. "From decay to growth: A demographic transition to economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1237-1261.
    40. Angel de la Fuente, 2002. "Does cohesion policy work?," UFAE and IAE Working Papers 563.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    41. Banerjee, Abhijit V & Duflo, Esther, 2003. "Inequality and Growth: What Can the Data Say?," Journal of Economic Growth, Springer, vol. 8(3), pages 267-299, September.
    42. Stansel, Dean, 2005. "Local decentralization and local economic growth: A cross-sectional examination of US metropolitan areas," Journal of Urban Economics, Elsevier, vol. 57(1), pages 55-72, January.
    43. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 437-466.
    44. Klenow, Peter J. & Rodriguez-Clare, Andres, 2005. "Externalities and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 11, pages 817-861, Elsevier.
    45. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    46. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
    47. Danny Quah, 1997. "Empirics for Growth and Distribution," CEP Discussion Papers dp0324, Centre for Economic Performance, LSE.
    48. Michael Kremer, 1993. "Population Growth and Technological Change: One Million B.C. to 1990," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 681-716.
    49. George Petrakos & Andres Rodríguez-Pose & Antonis Rovolis, 2003. "Growth, Integration and Regional Inequality in Europe," ERSA conference papers ersa03p46, European Regional Science Association.
    50. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
    51. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    52. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
    53. Quah, Danny T, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," Journal of Economic Growth, Springer, vol. 2(1), pages 27-59, March.
    54. de la Fuente, Angel, 2004. "Second-best redistribution through public investment: a characterization, an empirical test and an application to the case of Spain," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 489-503, September.
    55. Liu, Zhenjuan & Stengos, Thanasis, 1999. "Non-linearities in Cross-Country Growth Regressions: A Semiparametric Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 527-538, Sept.-Oct.
    56. Giannetti, Mariassunta, 2002. "The effects of integration on regional disparities: Convergence, divergence or both?," European Economic Review, Elsevier, vol. 46(3), pages 539-567, March.
    57. J. V. Henderson & J. F. Thisse (ed.), 2004. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 4, number 4.
    58. Magrini, Stefano, 1999. "The evolution of income disparities among the regions of the European Union," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 257-281, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roberto Ezcurra & Pedro Pascual, 2007. "Regional Polarisation and National Development in the European Union," Urban Studies, Urban Studies Journal Limited, vol. 44(1), pages 99-122, January.
    2. Azomahou, Théophile T. & El ouardighi, Jalal & Nguyen-Van, Phu & Pham, Thi Kim Cuong, 2011. "Testing convergence of European regions: A semiparametric approach," Economic Modelling, Elsevier, vol. 28(3), pages 1202-1210, May.
    3. Eckey, Hans-Friedrich & Türck, Matthias, 2007. "Convergence of EU-Regions. A Literature Report," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 10, pages 5-32.
    4. Eckey, Hans-Friedrich & Türck, Matthias, 2005. "Convergence of EU-regions: A literature report," Volkswirtschaftliche Diskussionsbeiträge 80, University of Kassel, Faculty of Economics and Management.
    5. Kurt Geppert & Andreas Stephan, 2008. "Regional disparities in the European Union: Convergence and agglomeration," Papers in Regional Science, Wiley Blackwell, vol. 87(2), pages 193-217, June.
    6. Maarten Bosker & Waldo Krugell, 2008. "Regional Income Evolution In South Africa After Apartheid," Journal of Regional Science, Wiley Blackwell, vol. 48(3), pages 493-523, August.
    7. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    8. Sergio J. Rey & Mark V. Janikas, 2003. "Convergence and space," Urban/Regional 0311002, University Library of Munich, Germany, revised 16 Nov 2003.
    9. Haupt, Harry & Schnurbus, Joachim & Semmler, Willi, 2018. "Estimation of grouped, time-varying convergence in economic growth," Econometrics and Statistics, Elsevier, vol. 8(C), pages 141-158.
    10. Grafström, Jonas & Jaunky, Vishal, 2017. "Convergence of Incentive Capabilities within the European Union," Ratio Working Papers 301, The Ratio Institute.
    11. Roberto Basile, 2009. "Productivity Polarization across Regions in Europe," International Regional Science Review, , vol. 32(1), pages 92-115, January.
    12. Sheila Chapman & Stefania Cosci & Loredana Mirra, 2012. "Income dynamics in an enlarged Europe: the role of capital regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 48(3), pages 663-693, June.
    13. Sergio J. Rey & Mark V. Janikas, 2005. "Regional convergence, inequality, and space," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 155-176, April.
    14. Marco Alfo & Giovanni Trovato & Robert J. Waldmann, 2008. "Testing for country heterogeneity in growth models using a finite mixture approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(4), pages 487-514.
    15. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308, Elsevier.
    16. Cem Ertur & Julie Le Gallo & Catherine Baumont, 2006. "The European Regional Convergence Process, 1980-1995: Do Spatial Regimes and Spatial Dependence Matter?," International Regional Science Review, , vol. 29(1), pages 3-34, January.
    17. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796, Elsevier.
    18. Völlmecke, Dominik & Jindra, Björn & Marek, Philipp, 2016. "FDI, human capital and income convergence—Evidence for European regions," Economic Systems, Elsevier, vol. 40(2), pages 288-307.
    19. Steven N. Durlauf & Andros Kourtellos & Chih Ming Tan, 2008. "Empirics of Growth and Development," Chapters, in: Amitava Krishna Dutt & Jaime Ros (ed.), International Handbook of Development Economics, Volumes 1 & 2, volume 0, chapter 3, Edward Elgar Publishing.
    20. Paul Johnson & Chris Papageorgiou, 2020. "What Remains of Cross-Country Convergence?," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 129-175, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:euf:ecopap:0229. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ECFIN INFO (email available below). General contact details of provider: https://edirc.repec.org/data/dg2ecbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.