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Interregional redistribution, growth and convergence

Author

Listed:
  • Damiaan Persyn
  • Koen Algoed

Abstract

Even in the absence of an explicit regional policy, countries redistribute substantial amounts of wealth between regions through taxation and social security. Using data on 140 European regions between 1995 and 2007, this paper nds that interregional income redistribution leads to lower regional economic growth and to slower within-country convergence. This may explain the observed lack of within-country convergence in the EU, in contrast to relatively fast between-country convergence where such redistributive schemes do not exist. The results suggest that investment in transport infrastructure or human capital offer better means to foster both regional growth and convergence.

Suggested Citation

  • Damiaan Persyn & Koen Algoed, 2011. "Interregional redistribution, growth and convergence," Working Papers of VIVES - Research Centre for Regional Economics 547232, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    • Handle: RePEc:ete:vivwps:547232
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    File URL: https://lirias.kuleuven.be/retrieve/398316
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    Cited by:

    1. Jose Villaverde & Adolfo Maza & María Hierro, 2014. "The Effects of Interpersonal Fiscal Redistribution on Provincial Growth and Convergence in Spain," Hacienda Pública Española / Review of Public Economics, IEF, vol. 209(2), pages 151-170, June.
    2. Hansjörg Blöchliger & José Maria Pinero Campos, 2011. "Tax Competition Between Sub-Central Governments," OECD Economics Department Working Papers 872, OECD Publishing.
    3. Marie-Eve Mulquin & Katja Senger, 2011. "Interregional transfers and economic convergence of regions," Serie Politique Economique 58, Université de Namur, Centre de Recherches en Economie Regionale et Politique Economique.
    4. Yasna Cortés Garriga & Dusan Paredes Araya, 2013. "The Common Municipal Fund: What is the role in the convergence of local incomes?," Documentos de Trabajo en Economia y Ciencia Regional 45, Universidad Catolica del Norte, Chile, Department of Economics, revised Apr 2013.
    5. Geert Jennes, 2021. "Interregional fiscal transfers resulting from central government debt: New insights and consequences for political economy," Kyklos, Wiley Blackwell, vol. 74(2), pages 196-223, May.

    More about this item

    Keywords

    solidarity; regions; economic growth; redistribution; inequality; convergence;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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