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The Cohesion vs Growth Tradeoff - Evidence from EU Regions (1980-2000)

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Matthieu Crozet ()
Pamina Koenig ()

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Abstract

This paper provides an empirical investigation of the cohesion versus growth tradeoff on European regions at a fine geographical disaggregation level. We use data on gdp per capita at the NUTS3 level for 1980-2000 to estimate the influence of income dispersion within NUTS1 on their economic growth. We analyze the existence of the tradeoff using Redding and Venables’(2004) approach. From a simple new economic geography model in which we add a technological externality in order to allow for local growth, we derive an estimable equation linking the level of factor prices in a region to the level of inequalities inside that region, as well as the region’s access to markets. Our results show a positive relation between the gdp per capita growth rate of a region and the change in the level of inequalities inside the region. Finally, an increase in market potential, as expected, has an unambiguous positive impact on local growth.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p716.

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Date of creation: Aug 2005
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Handle: RePEc:wiw:wiwrsa:ersa05p716

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  1. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June. [Downloadable!] (restricted)
  2. Feldman, Maryann P. & Audretsch, David B., 1999. "Innovation in cities:: Science-based diversity, specialization and localized competition," European Economic Review, Elsevier, vol. 43(2), pages 409-429, February. [Downloadable!] (restricted)
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  1. Brauninger, Michael & Niebuhr, Annekatrin, 2005. "Agglomeration, Spatial Interaction and Convergence in the EU," Discussion Paper Series 26150, Hamburg Institute of International Economics. [Downloadable!]
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