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Income inequality, decentralisation and regional development in Western Europe

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  • Pike, Andy J
  • Rodríguez-Pose, Andrés
  • Tomaney, John
  • Torrisi, Gianpiero
  • Tselios, Vassilis

Abstract

This paper deals with the relationship between decentralisation, regional economic development, and income inequality within regions. Using multiplicative interaction models and regionally aggregated microeconomic data for more than 100,000 individuals in the European Union (EU), it addresses two main questions. First, whether fiscal and political decentralisation in Western Europe has an effect on within regional interpersonal inequality. Second, whether this potential relationship is mediated by the level of economic development of the region. The results of the analysis show that greater fiscal decentralisation is associated with lower interpersonal income inequality, but as regional income rises, further decentralisation is connected to a lower decrease in inequality. This finding is robust to the measurement and definition of income inequality, as well as to the weighting of the spatial units by their population size.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8575.

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Date of creation: Sep 2011
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Handle: RePEc:cpr:ceprdp:8575

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Keywords: Europe; fiscal and political decentralization; income inequality; income per capita; interaction; regions;

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Cited by:
  1. Andrés Rodríguez-Pose & Yannis Psycharis & Vassilis Tselios, 2012. "Public investment and regional growth and convergence: Evidence from Greece," Papers in Regional Science, Wiley Blackwell, vol. 91(3), pages 543-568, 08.
  2. Diaz-Serrano, Luis & Rodríguez-Pose, Andrés, 2014. "Decentralization and the Welfare State: What Do Citizens Perceive?," MPRA Paper 54123, University Library of Munich, Germany.
  3. Minas, Renate & Bäckman, Olof & Jakobsen, Vibeke & Korpi, Tomas & Lorentzen, Thomas & Kauppinen, Timo, 2014. "Rescaling inequality? Welfare reform and local variation in social assistance payments," Working Paper Series 1/2014, Swedish Institute for Social Research.
  4. Yasna Cortés Garriga & Dusan Paredes Araya, 2013. "El Fondo Común Municipal: ¿Cuál es el rol en la Convergencia de Ingresos Locales?," Documentos de Trabajo en Economia y Ciencia Regional 45, Universidad Catolica del Norte, Chile, Department of Economics, revised Apr 2013.

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