IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_3622.html
   My bibliography  Save this paper

Spatial Inequality and Development - Is there an Inverted-U Relationship?

Author

Listed:
  • Christian Lessmann

Abstract

This paper studies the hypothesis of an inverted-U-shaped relationship between spatial inequality and economic development. The theory of Kuznets (1955) and Williamson (1965) suggests that (spatial) inequality first increases in the process of development, then peaks, and then decreases. To test this hypothesis I have used a unique panel data set of spatial inequalities in 55 countries at different stages of economic development, covering the period 1980-2009. Parametric and semiparametric regressions are carried out using cross-section and (unbalanced) panel data. The results provide strong support for the existence of an inverted U, but importantly I also find spatial inequalities to increase again at very high levels of economic development. Although many factors may be contributing to this rise, one explanation rests on the process of tertiarization, i.e., the structural shift from industrial production towards a service base in the highest-developed economies.

Suggested Citation

  • Christian Lessmann, 2011. "Spatial Inequality and Development - Is there an Inverted-U Relationship?," CESifo Working Paper Series 3622, CESifo.
    • Handle: RePEc:ces:ceswps:_3622
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp3622.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kailei Wei & Shujie Yao & Aying Liu, 2009. "Foreign Direct Investment and Regional Inequality in China," Review of Development Economics, Wiley Blackwell, vol. 13(4), pages 778-791, November.
    2. Andrés Rodríguez-Pose, 2012. "Trade and Regional Inequality," Economic Geography, Taylor & Francis Journals, vol. 88(2), pages 109-136, April.
    3. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    4. Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio & Wacziarg, Romain, 2003. "Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-194, June.
    5. Chen, Jian & Fleisher, Belton M., 1996. "Regional Income Inequality and Economic Growth in China," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 141-164, April.
    6. Michael Lokshin, 2006. "Difference-based semiparametric estimation of partial linear regression models," Stata Journal, StataCorp LP, vol. 6(3), pages 377-383, September.
    7. Anke S. Kessler & Nico A. Hansen & Christian Lessmann, 2011. "Interregional Redistribution and Mobility in Federations: A Positive Approach," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1345-1378.
    8. Xiaobo Zhang & Kevin Honglin Zhang, 2002. "Regional Inequality," Chapters, in: Shang-Jin Wei & Guanzhong James Wen & Huizhong Zhou (ed.), The Globalization of the Chinese Economy, chapter 8, Edward Elgar Publishing.
    9. Anthony J. Venables, 2005. "Spatial disparities in developing countries: cities, regions, and international trade," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 3-21, January.
    10. Badi H. Baltagi & Dong Li, 2002. "Series Estimation of Partially Linear Panel Data Models with Fixed Effects," Annals of Economics and Finance, Society for AEF, vol. 3(1), pages 103-116, May.
    11. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
    12. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    13. Christian Lessmann, 2012. "Regional Inequality and Decentralization: An Empirical Analysis," Environment and Planning A, , vol. 44(6), pages 1363-1388, June.
    14. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-954, July.
    15. Ravi Kanbur & Xiaobo Zhang, 2005. "Fifty Years of Regional Inequality in China: a Journey Through Central Planning, Reform, and Openness," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 87-106, February.
    16. Amos, Orley Jr., 1988. "Unbalanced regional growth and regional income inequality in the latter stages of development," Regional Science and Urban Economics, Elsevier, vol. 18(4), pages 549-566, November.
    17. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
    18. Barrios, Salvador & Strobl, Eric, 2009. "The dynamics of regional inequalities," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 575-591, September.
    19. Andrés Rodríguez-Pose & Roberto Ezcurra, 2010. "Does decentralization matter for regional disparities? A cross-country analysis," Journal of Economic Geography, Oxford University Press, vol. 10(5), pages 619-644, September.
    20. Brambor, Thomas & Clark, William Roberts & Golder, Matt, 2006. "Understanding Interaction Models: Improving Empirical Analyses," Political Analysis, Cambridge University Press, vol. 14(1), pages 63-82, January.
    21. John DiNardo & Justin L. Tobias, 2001. "Nonparametric Density and Regression Estimation," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 11-28, Fall.
    22. Kanbur, Ravi & Venables, Anthony J. (ed.), 2005. "Spatial Inequality and Development," OUP Catalogue, Oxford University Press, number 9780199278633.
    23. Kailei Wei & Shujie Yao & Aying Liu, 2008. "Foreign Direct Investment and Regional Inequality in China," WIDER Working Paper Series RP2008-94, World Institute for Development Economic Research (UNU-WIDER).
    24. Nicola Gennaioli & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2013. "Human Capital and Regional Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 105-164.
    25. Nicola Gennaioli & Rafael La Porta & Florencio Lopez De Silanes & Andrei Shleifer, 2014. "Growth in regions," Journal of Economic Growth, Springer, vol. 19(3), pages 259-309, September.
      • Nicola Gennaioli & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, "undated". "Growth in Regions," Working Paper 73436, Harvard University OpenScholar.
      • Nicola Gennaioli & Rafael La Porta & Florencio Lopez de Silanes & Andrei Shleifer, 2013. "Growth in Regions," NBER Working Papers 18937, National Bureau of Economic Research, Inc.
    26. John A. List & Craig A. Gallet, 1999. "The Kuznets Curve: What Happens After the Inverted‐U?," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 200-206, June.
    27. Frances Stewart, 2000. "Crisis Prevention: Tackling Horizontal Inequalities," Oxford Development Studies, Taylor & Francis Journals, vol. 28(3), pages 245-262.
    28. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
    29. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    30. Marinella Terrasi, 1999. "Convergence and divergence across Italian regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 33(4), pages 491-510.
    31. Christian Lessmann, 2009. "Fiscal Decentralization and Regional Disparity: Evidence from Cross-Section and Panel Data," Environment and Planning A, , vol. 41(10), pages 2455-2473, October.
    32. Robert E. Lucas, 2000. "Some Macroeconomics for the 21st Century," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 159-168, Winter.
    33. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
    34. Jian, Tianlun & Sachs, Jeffrey D. & Warner, Andrew M., 1996. "Trends in regional inequality in China," China Economic Review, Elsevier, vol. 7(1), pages 1-21.
    35. Araujo, M. Caridad & Ferreira, Francisco H.G. & Lanjouw, Peter & Özler, Berk, 2008. "Local inequality and project choice: Theory and evidence from Ecuador," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1022-1046, June.
    36. World Bank, 2011. "World Development Indicators 2011," World Bank Publications - Books, The World Bank Group, number 2315.
    37. Vincenzo Verardi & Nicolas Debarsy, 2012. "Robinson's square root of N consistent semiparametric regression estimator in Stata," Stata Journal, StataCorp LP, vol. 12(4), pages 726-735, December.
    38. Christian Lessmann, 2012. "Regional inequality and decentralization: an empirical analysis," Environment and Planning A, Pion Ltd, London, vol. 44(6), pages 1363-1388, June.
    39. Hirschman, Albert O., 1973. "The changing tolerance for income inequality in the course of economic development," World Development, Elsevier, vol. 1(12), pages 29-36, December.
    40. Ruslan Yemtsov, 2003. "Quo Vadis? Inequality and Poverty Dynamics across Russian Regions," WIDER Working Paper Series DP2003-67, World Institute for Development Economic Research (UNU-WIDER).
    41. Mills, Edwin S & Ferranti, David M, 1971. "Market Choices and Optimum City Size," American Economic Review, American Economic Association, vol. 61(2), pages 340-345, May.
    42. Christian Lessmann, 2016. "Regional Inequality and Internal Conflict," German Economic Review, Verein für Socialpolitik, vol. 17(2), pages 157-191, May.
    43. Ravi Kanbur & Anthony J. Venables & Guanghua Wan, 2005. "Introduction to the Special Issue: Spatial Inequality and Development in Asia," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 1-4, February.
    44. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    45. Frances Stewart, "undated". "Horizontal Inequalities: A Neglected Dimension of Development," QEH Working Papers qehwps81, Queen Elizabeth House, University of Oxford.
    46. Mehran, Farhad, 1976. "Linear Measures of Income Inequality," Econometrica, Econometric Society, vol. 44(4), pages 805-809, July.
    47. Zeng, Dao-Zhi & Zhao, Laixun, 2010. "Globalization, interregional and international inequalities," Journal of Urban Economics, Elsevier, vol. 67(3), pages 352-361, May.
    48. Sylvie Lambert & Martin Ravallion & Dominique van de Walle, 2010. "A Micro‐Decomposition Analysis of Aggregate Human Development Outcomes," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(2), pages 119-145, April.
    49. Fan, C Cindy & Casetti, Emilio, 1994. "The Spatial and Temporal Dynamics of U.S. Regional Income Inequality, 1950-1989," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 28(2), pages 177-196.
    50. Chris Elbers & Peter Lanjouw & Johan A. Mistiaen & Berk Özler & Kenneth Simler, 2003. "Are Neighbours Equal? Estimating Local Inequality in Three Developing Countries," WIDER Working Paper Series DP2003-52, World Institute for Development Economic Research (UNU-WIDER).
    51. Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
    52. Rodriguez-Pose, Andres & Gill, Nicholas, 2006. "How does trade affect regional disparities?," World Development, Elsevier, vol. 34(7), pages 1201-1222, July.
    53. Lessmann, Christian, 2013. "Foreign direct investment and regional inequality: A panel data analysis," China Economic Review, Elsevier, vol. 24(C), pages 129-149.
    54. Kanbur, Ravi & Venables, Anthony J., 2005. "Rising Spatial Disparities and Development," Working Paper Series PB3/2005, World Institute for Development Economic Research (UNU-WIDER).
    55. Desbordes, Rodolphe & Verardi, Vincenzo, 2012. "Refitting the Kuznets curve," Economics Letters, Elsevier, vol. 116(2), pages 258-261.
    56. Christa Deiwiks & Lars-Erik Cederman & Kristian Skrede Gleditsch, 2012. "Inequality and conflict in federations," Journal of Peace Research, Peace Research Institute Oslo, vol. 49(2), pages 289-304, March.
    57. Francois Libois & Vincenzo Verardi, 2013. "Semiparametric fixed-effects estimator," Stata Journal, StataCorp LP, vol. 13(2), pages 329-336, June.
    58. Easterly, William, 2001. "The Middle Class Consensus and Economic Development," Journal of Economic Growth, Springer, vol. 6(4), pages 317-335, December.
    59. Durlauf, Steven N., 2001. "Manifesto for a growth econometrics," Journal of Econometrics, Elsevier, vol. 100(1), pages 65-69, January.
    60. Alberto F. Ades & Edward L. Glaeser, 1995. "Trade and Circuses: Explaining Urban Giants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 195-227.
    61. Yatchew, A., 1997. "An elementary estimator of the partial linear model," Economics Letters, Elsevier, vol. 57(2), pages 135-143, December.
    62. Ravi Kanbur & Tony Venables, 2005. "Introduction: Spatial inequality and development," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 1-2, January.
    63. World Bank, 2010. "World Development Indicators 2010," World Bank Publications - Books, The World Bank Group, number 4373.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lessmann, Christian, 2013. "Foreign direct investment and regional inequality: A panel data analysis," China Economic Review, Elsevier, vol. 24(C), pages 129-149.
    2. Lessmann, Christian & Seidel, André, 2017. "Regional inequality, convergence, and its determinants – A view from outer space," European Economic Review, Elsevier, vol. 92(C), pages 110-132.
    3. Georg Hirte & Christian Lessmann, 2014. "Trade, Integration, and Interregional Inequality," CESifo Working Paper Series 4799, CESifo.
    4. Georg Hirte & Christian Lessmann, 2014. "Trade and Interregional Inequality," ERSA conference papers ersa14p304, European Regional Science Association.
    5. Alfonso Díez‐Minguela & Rafael González‐Val & Julio Martinez‐Galarraga & M. Teresa Sanchis & Daniel A. Tirado, 2020. "The long‐term relationship between economic development and regional inequality: South‐West Europe, 1860–2010," Papers in Regional Science, Wiley Blackwell, vol. 99(3), pages 479-508, June.
    6. Lessmann Christian, 2016. "Regional Inequality and Internal Conflict," German Economic Review, De Gruyter, vol. 17(2), pages 157-191, May.
    7. Achten, Sandra & Lessmann, Christian, 2020. "Spatial inequality, geography and economic activity," World Development, Elsevier, vol. 136(C).
    8. Christian Lessmann, 2012. "Regional Inequality and Decentralization: An Empirical Analysis," Environment and Planning A, , vol. 44(6), pages 1363-1388, June.
    9. Roberto Ezcurra & Andr�s Rodr�guez-Pose, 2014. "Trade Openness and Spatial Inequality in Emerging Countries," Spatial Economic Analysis, Taylor & Francis Journals, vol. 9(2), pages 162-182, June.
    10. Andrés Rodríguez-Pose, 2012. "Trade and Regional Inequality," Economic Geography, Taylor & Francis Journals, vol. 88(2), pages 109-136, April.
    11. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    12. Ezcurra, Roberto & Rodríguez-Pose, Andrés, 2013. "Does Economic Globalization affect Regional Inequality? A Cross-country Analysis," World Development, Elsevier, vol. 52(C), pages 92-103.
    13. Łukasz Piętak, 2022. "Regional disparities, transmission channels and country's economic growth," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 270-306, January.
    14. Christian Lessmann, 2012. "Regional inequality and decentralization: an empirical analysis," Environment and Planning A, Pion Ltd, London, vol. 44(6), pages 1363-1388, June.
    15. Andrés Rodríguez-Pose & Roberto Ezcurra, 2010. "Does decentralization matter for regional disparities? A cross-country analysis," Journal of Economic Geography, Oxford University Press, vol. 10(5), pages 619-644, September.
    16. Yongzheng Liu & Jorge Martinez-Vazquez & Alfred M. Wu, 2017. "Fiscal decentralization, equalization, and intra-provincial inequality in China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(2), pages 248-281, April.
    17. Roberto Ezcurra & Andrés Rodríguez-Pose, 2011. "Can the economic impact of political decentralisation be measured?," Working Papers 2011-02, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
    18. Kalenborn, Christine & Lessmann, Christian, 2014. "Regional Income Inequality lowers Life Satisfaction: Evidence from OECD Countries," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100561, Verein für Socialpolitik / German Economic Association.
    19. Roberto Ezcurra & Andrés Rodríguez-Pose, 2017. "Does ethnic segregation matter for spatial inequality?," Journal of Economic Geography, Oxford University Press, vol. 17(6), pages 1149-1178.
    20. repec:esx:essedp:729 is not listed on IDEAS
    21. Michel DIMOU, 2008. "Urbanisation, Agglomeration Effects And Regional Inequality : An Introduction," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 27, pages 7-12.

    More about this item

    Keywords

    regional inequality; Kuznets curve; panel data; semiparametric estimates;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3622. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.