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Regional Heterogenity and Conditional Convergence

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Michael Beenstock ()
Daniel Felsenstein ()

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Abstract

This paper stresses the importance of accounting for regional heterogenity in the dynamic analysis of regional economic disparities. Studies of regional growth invariably presume regions are homogenous in that their socio-demographic composition is assumed to be broadly similar. We argue that any analysis of regional convergence needs to be tested conditionally, i.e. conditional upon the socio-demographic structure of the workers in the various regions. To this end, we estimate various measures of conditional regional earnings inequality using Israeli regional data for the period 1991-2002. Our results show that much of the regional earnings inequality may be accounted for by the conditioning variables. Both in measures of regional convergence and regional mobility, conditioning makes a large difference to the results accounting for up to half of the observed levels of inequality. Ignoring regional heterogeneity may therefore lead to serious over-estimation of the underlying level of regional inequality.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p307.

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Date of creation: Aug 2005
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Handle: RePEc:wiw:wiwrsa:ersa05p307

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  1. Dumond, J Michael & Hirsch, Barry T & Macpherson, David A, 1999. "Wage Differentials across Labor Markets and Workers: Does Cost of Living Matter?," Economic Inquiry, Oxford University Press, vol. 37(4), pages 577-98, October.
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  2. Efthymios G. Tsionas, 2000. "Regional Growth and Convergence: Evidence from the United States," Regional Studies, Taylor and Francis Journals, vol. 34(3), pages 231-238, May. [Downloadable!] (restricted)
  3. Eli Berman, 2000. "Sect, Subsidy, And Sacrifice: An Economist'S View Of Ultra-Orthodox Jews," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 905-953, August. [Downloadable!] (restricted)
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  4. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June. [Downloadable!] (restricted)
  5. Luciana M.S. Servo & Carlos R. Azzoni, 2002. "Education, cost of living and regional wage inequality in Brazil," Papers in Regional Science, Springer, vol. 81(2), pages 157-175. [Downloadable!] (restricted)
  6. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers 629, Yale - Economic Growth Center.
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