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Inequalities in income and education and regional economic growth in western Europe

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  • Andrés Rodríguez-Pose
  • Vassilis Tselios

Abstract

Does inequality matter for regional growth? This paper addresses this question by using microeconomic data for more than 100,000 individuals over a period of 5 years from the European Community Household Panel (ECHP) dataset, complemented with Eurostat's Regio data, in order to examine the impact of income and educational distribution on regional economic growth. Educational distribution is measured in terms of educational achievement as well as educational inequality, and income distribution in terms of income per capita and income inequality, not only for the whole of the population, but also for normally working people. Our results indicate that, given existing levels of inequality, an increase in a region's income and educational inequality has a significant positive relationship with subsequent economic growth. Nevertheless, the reverse does not seem to be the case, as we do not find a causal link between growth and changes in inequality levels. Despite the fact that educational achievement is positively correlated with economic growth, the results also suggest that inequalities in income and educational attainment levels matter more for economic performance than average income and educational attainment, respectively. Initial income levels, in contrast, are irrelevant for regional economic growth as they are very sensitive to the inclusion of control variables.
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  • Andrés Rodríguez-Pose & Vassilis Tselios, 2010. "Inequalities in income and education and regional economic growth in western Europe," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(2), pages 349-375, April.
  • Handle: RePEc:spr:anresc:v:44:y:2010:i:2:p:349-375
    DOI: 10.1007/s00168-008-0267-2
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    1. Raul Ramos & Vicente Royuela, 2014. "“Income inequality in Europe. Analysis of recent trends at the regional level”," IREA Working Papers 201425, University of Barcelona, Research Institute of Applied Economics, revised Oct 2014.
    2. Andrés Rodríguez-Pose & Yannis Psycharis & Vassilis Tselios, 2012. "Public investment and regional growth and convergence: Evidence from Greece," Papers in Regional Science, Wiley Blackwell, vol. 91(3), pages 543-568, August.
    3. Kolluru Mythili & Semenenko Tetiana, 2021. "Income Inequalities in EU Countries: Gini Indicator Analysis," Economics, Sciendo, vol. 9(1), pages 125-142, June.
    4. Dan‐Olof Rooth & Anders Stenberg, 2012. "The Shape of the Income Distribution and Economic Growth – Evidence from Swedish Labor Market Regions," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(2), pages 196-223, May.
    5. Yu, Nannan & Yu, Bo & de Jong, Martin & Storm, Servaas, 2015. "Does inequality in educational attainment matter for China's economic growth?," International Journal of Educational Development, Elsevier, vol. 41(C), pages 164-173.
    6. Marta Simões & João Andrade & Adelaide Duarte, 2013. "A regional perspective on inequality and growth in Portugal using panel cointegration analysis," International Economics and Economic Policy, Springer, vol. 10(3), pages 427-451, September.
    7. Andrés Rodríguez-Pose & Vassilis Tselios, 2012. "Welfare Regimes and the Incentives to Work and Get Educated," Environment and Planning A, , vol. 44(1), pages 125-149, January.
    8. Vassilis Tselios, 2009. "Growth and Convergence in Income Per Capita and Income Inequality in the Regions of the EU," Spatial Economic Analysis, Taylor & Francis Journals, vol. 4(3), pages 343-370.
    9. Benos, Nikos & Tsiachtsiras, Georgios, 2019. "Innovation and Income Inequality: World Evidence," MPRA Paper 92050, University Library of Munich, Germany.
    10. Hyejin Jung & Inseok Seo & Kyujin Jung, 2018. "Mediating Role of Entrepreneurship in Explaining the Association Between Income Inequality and Regional Economic Performance," Economic Development Quarterly, , vol. 32(2), pages 135-145, May.
    11. Ana Poças & Elias Soukiazis, 2013. "Are health factors important for regional growth and convergence? An empirical analysis for the Portuguese districts," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 9(1/2), pages 44-64.
    12. Kennedy, Tom & Smyth, Russell & Valadkhani, Abbas & Chen, George, 2017. "Does income inequality hinder economic growth? New evidence using Australian taxation statistics," Economic Modelling, Elsevier, vol. 65(C), pages 119-128.
    13. Diana Barros & Aurora A. C. Teixeira, 2021. "Unlocking the black box: A comprehensive meta-analysis of the main determinants of within-region income inequality," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 41(1), pages 55-93, February.
    14. Noman Arshed & Awais Anwar & Nabeela Kousar & Samra Bukhari, 2018. "Education Enrollment Level and Income Inequality: A Case of SAARC Economies," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 140(3), pages 1211-1224, December.
    15. Benos, Nikos & Karagiannis, Stelios & Karkalakos, Sotiris, 2015. "Proximity and growth spillovers in European regions: The role of geographical, economic and technological linkages," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 124-139.
    16. Arne Melchior, 2009. "East-West Integration and the Economic Geography of Europe," CASE Network Studies and Analyses 0379, CASE-Center for Social and Economic Research.
    17. Leonel Prieto & Tagi Sagafi-nejad & Balaji Janamanchi, 2013. "A Bourdieusian Perspective on Acculturation: Mexican Immigrants in the United States," Administrative Sciences, MDPI, Open Access Journal, vol. 3(4), pages 1-16, December.
    18. Ketenci, Natalya, 2017. "The Impact of the Global Financial Crisis on the Economic Development in the Eurasian Region," MPRA Paper 83780, University Library of Munich, Germany, revised 2017.
    19. Peng Zhou & Fengwen Chen & Wei Wang & Peixin Song & Chenliang Zhu, 2019. "Does the Development of Information and Communication Technology and Transportation Infrastructure Affect China’s Educational Inequality?," Sustainability, MDPI, Open Access Journal, vol. 11(9), pages 1-19, May.
    20. Vassilis Tselios, 2014. "The Granger-causality between income and educational inequality: a spatial cross-regressive VAR framework," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 221-243, August.
    21. Adelaide Duarte & Marta Simões, 2010. "Regional growth in Portugal: assessing the contribution of earnings and education inequality," GEMF Working Papers 2010-11, GEMF, Faculty of Economics, University of Coimbra.
    22. David Castells-Quintana & Raul Ramos & Vicente Royuela, 2015. "Income inequality in European Regions: Recent trends and determinants," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 35(2), pages 123-146, October.
    23. D.G. Rodionov & T.J. Kudryavtseva & A.E. Skhvediani, 2018. "Human Development and Income Inequality as Factors of Regional Economic Growth," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 323-337.
    24. Adelaide P. S. Duarte & Marta C. N. Simões, 2011. "Inequality and Growth relevant Links for the Portuguese Economy," Book Chapters, in: Mirjana Radovic Markovic & Srdjan Redzepagic & João Sousa Andrade & Paulino Teixeira (ed.), Serbia and the European Union: Economic Lessons from the New Member States, edition 1, volume 1, chapter 11, pages 167-184, Institute of Economic Sciences.

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    Keywords

    O15; O18; D31; E24;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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