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Growth and Convergence in Income Per Capita and Income Inequality in the Regions of the EU

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  • Vassilis Tselios

Abstract

Abstract The neoclassical growth model predicts that there will be both a reduction of income per capita disparities over time and long-term convergence in income inequality levels. This paper examines whether this holds true for the EU using data from the European Community Household Panel for 102 regions over the period 1995–2000. The analysis is conducted using cross-sectional and panel data growth models with spatial interaction effects. The results reveal the presence of a conditional convergence in income per capita after controlling for educational attainment, unemployment, sectoral composition, spatially lagged growth of income per capita, and regional fixed effects, and that of an unconditional convergence in income inequality. Expansion et convergence dans les revenus par habitant et inégalité des revenus dans les régions de l'UE RÉSUMÉ Le modèle de croissance néoclassique prévoit que l'on assistera, à terme, à une réduction des disparités entre les revenus par habitant, ainsi qu’à une convergence à long terme des disparités dans l'inégalité des revenus. La présente communication examine l'applicabilité éventuelle de ce modèle à l'UE, en utilisant des données de l'European Community Household Panel pour 102 régions, au cours de la période 1995–2000. On effectue cette analyse en utilisant des modèles de croissance transversaux et de commissions, avec des effets d'interaction spatiale: ses résultats révèlent l'existence d'une convergence des revenus par habitant, après avoir contrôlé les réalisations éducationnelles, la composition sectorielle, la croissance du retard spatial des revenus par habitant, ainsi que des effets régionaux fixes, ainsi que la présence d'une convergence inconditionnelle dans l'inégalité des revenus. Crecimiento y convergencia en ingresos per capita y desigualdad de ingresos en las regiones de la UE RÉSUMÉN El modelo neoclásico de crecimiento predice que con el tiempo se producirá una reducción de las disparidades en los ingresos per capita, así como una convergencia a largo plazo de los niveles de desigualdad de ingresos. Este trabajo examina la veracidad de este caso en la UE utilizando datos procedentes del European Community Household Panel aplicables a 102 regiones durante el período 1995–2000. El análisis se conduce utilizando modelos de crecimiento de datos transeccionales y de panel con efectos de interacción espacial. Los resultados revelan la presencia de una convergencia condicional en los ingresos per capita después de controlar el rendimiento educacional, desempleo, composición sectoral, crecimiento limitado espacialmente de los ingresos per capita y efectos regionales fijos, así como la presencia de una convergencia incondicional en la desigualdad de ingresos.

Suggested Citation

  • 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.
  • Handle: RePEc:taf:specan:v:4:y:2009:i:3:p:343-370 DOI: 10.1080/17421770903114711
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    Cited by:

    1. Shatakshee Dhongde & Xing Miao, 2013. "Cross-Country Convergence in Income Inequality," Working Papers 290, ECINEQ, Society for the Study of Economic Inequality.
    2. Rodríguez-Pose, Andrés & Tselios, Vassilis & Winkler, Deborah & Farole, Thomas, 2013. "Geography and the Determinants of Firm Exports in Indonesia," World Development, Elsevier, vol. 44(C), pages 225-240.
    3. Pei-Chien Lin & Ho-Chuan Huang, 2011. "Inequality convergence in a panel of states," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(2), pages 195-206, June.
    4. repec:spr:empeco:v:53:y:2017:i:4:d:10.1007_s00181-016-1170-9 is not listed on IDEAS
    5. Jesus Felipe & John McCombie, 2012. "Problems with Regional Production Functions and Estimates of Agglomeration Economies: A Caveat Emptor for Regional Scientists," Economics Working Paper Archive wp_725, Levy Economics Institute.
    6. Ho, Tsung-wu, 2015. "Income inequality may not converge after all: Testing panel unit roots in the presence of cross-section cointegration," The Quarterly Review of Economics and Finance, Elsevier, vol. 56(C), pages 68-79.
    7. Davide Fiaschi & Andrea Mario Lavezzi & Angela Parenti, 2017. "Does EU Cohesion Policy Work? Theory and Evidence," Discussion Papers 2017/217, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    8. Lin, Pei-Chien & Huang, Ho-Chuan (River), 2012. "Inequality convergence revisited: Evidence from stationarity panel tests with breaks and cross correlation," Economic Modelling, Elsevier, vol. 29(2), pages 316-325.
    9. Millán Díaz-Foncea & Carmen Marcuello, 2014. "The Relation between Total Employment and Cooperative Employment: A Convergence and Causality Analysis," Spatial Economic Analysis, Taylor & Francis Journals, pages 71-92.
    10. Chambers, Dustin & Dhongde, Shatakshee, 2016. "Convergence in income distributions: Evidence from a panel of countries," Economic Modelling, Elsevier, vol. 59(C), pages 262-270.

    More about this item

    Keywords

    Income inequality; convergence; spatial econometrics; Europe; C21; C23; O12; O52;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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