Competition, complementarity and increasing disparities among the Regions of Spain and Portugal

The aim of this paper is to investigate the role of regional competition and complementarity on increasing internal disparities within the Iberian peninsula over the last two decades. Competitive and complementary dynamics among the regions of Spain and Portugal rely on their intense trade, which is based on a combination of their comparative advantages, increasing returns and lowered transportation costs. In that purpose, we apply first the DENDRINOS-SONIS model (1988) to the Gross Domestic Product of the regions of Spain and Portugal. Essentially, the model implies that growth in one region takes place at the expense of at least one other. The results show significant complementary relationships between Este, Centro and Sur ; and highlight the strong influence of Este and Madrid on all the regions. Since both countries are major beneficiaries of European cohesion efforts, we extend the application to the key sectors of regional development policies : agriculture, energy, non-market services, transportation and telecommunications. The nature of the relationships that are revealed encourages policies supporting the three first sectors but not the transportation and telecommunication sector. Classification JEL : O52, R11, R15.