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Income inequality, decentralisation and regional development in Western Europe

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

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.

Suggested Citation

  • Pike, Andy & Tomaney, John & Rodríguez-Pose, Andrés & Tselios, Vassilis & Torrisi, Gianpiero, 2011. "Income inequality, decentralisation and regional development in Western Europe," CEPR Discussion Papers 8575, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8575
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    More about this item

    Keywords

    Income inequality; Income per capita; Fiscal and political decentralization; Interaction; Regions; Europe;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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