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Interregional redistribution, growth and convergence

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  • Damiaan Persyn
  • Koen Algoed

Abstract

Countries redistribute substantial amounts of wealth between regions through taxation and social security, even in the absence of an explicit regional policy. Economic theory suggests such redistribution might be distorting. This paper indeed finds that more redistribution leads to subsequent lower growth, but also slower interregional convergence. This may explain the observed lack of within-country convergence in the EU, in contrast to faster convergence between countries where such redistributive schemes do not exist. In contrast, investment in infrastructure or human and physical capital is found to foster both growth and convergence.

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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, Vives in its series Vives discussion paper series with number 4.

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Date of creation: 2009
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Handle: RePEc:ete:vivwps:4

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Keywords: income redistribution; inequality; regional convergence;

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Cited by:
  1. Hansjörg Blöchliger & José Maria Pinero Campos, 2011. "Tax Competition Between Sub-Central Governments," OECD Working Papers on Fiscal Federalism 13, OECD Publishing.
  2. Marie-Eve Mulquin & Katja Senger, 2011. "Interregional transfers and economic convergence of regions," S�rie Politique Economique 58, Facult�s Universitaires Notre-Dame de la Paix, Centre de Recherches en Economie R�gionale et Politique Economique.
  3. 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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