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Income inequality, decentralisation and regional development in Western Europe

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Author Info

  • Vassilis Tselios

    (University of Groningen)

  • Andrés Rodríguez-Pose

    ()
    (IMDEA Social Sciences Institute)

  • Andy Pike

    ()
    (Newcastle University)

  • John Tomaney

    ()
    (Newcastle University)

  • Gianpiero Torrisi

    ()
    (Newcastle University)

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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Bibliographic Info

Paper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2011-16.

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Date of creation: 16 Sep 2011
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Handle: RePEc:imd:wpaper:wp2011-16

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

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References

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  1. Andreas P. Kyriacoua & Oriol Roca-Sagalésb, 2010. "Fiscal and Political Decentralization and Government Quality," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1005, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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  7. Christian Lessmann, 2009. "Fiscal decentralization and regional disparity: evidence from cross-section and panel data," Environment and Planning A, Pion Ltd, London, vol. 41(10), pages 2455-2473, October.
  8. Breusch, T.S. & Pagan, A.R., . "The Lagrange multiplier test and its applications to model specification in econometrics," CORE Discussion Papers RP -412, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Neyapti, Bilin, 2006. "Revenue decentralization and income distribution," Economics Letters, Elsevier, vol. 92(3), pages 409-416, September.
  10. Era Dabla-Norris, 2006. "The Challenge of Fiscal Decentralisation in Transition Countries," Comparative Economic Studies, Palgrave Macmillan, vol. 48(1), pages 100-131, March.
  11. Jorge Martinez-Vazquez & Robert McNab, 2001. "Fiscal Decentralization and Economic Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  12. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
  13. Iimi, Atsushi, 2005. "Decentralization and economic growth revisited: an empirical note," Journal of Urban Economics, Elsevier, vol. 57(3), pages 449-461, May.
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Citations

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Cited by:
  1. Floriana Cerniglia & Riccarda Longaretti, 2013. "Federalism, education-related public good and growth when agents are heterogeneous," Journal of Economics, Springer, vol. 109(3), pages 271-301, July.
  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. Horváth, Gyula & Lóránd, Balázs, 2012. "Decentralizáció és gazdasági fejlődés. Az olasz példa
    [Decentralization and economic development. The case of Italy]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1273-1298.
  4. Andrés Rodríguez-Pose & Yannis Psycharis & Vassilis Tselios, 2012. "Public investment and regional growth and convergence: Evidence from Greece," Working Papers 2012-05, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  5. Caroline-Antonia Goerl & Mike Seiferling, 2014. "Income Inequality, Fiscal Decentralization and Transfer Dependency," IMF Working Papers 14/64, International Monetary Fund.
  6. 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.
  7. 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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