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Income inequality, decentralisation and regional development in Western Europe

  • Pike, Andy J
  • Rodriguez-Pose, Andres
  • Tomaney, John
  • Torrisi, Gianpiero
  • Tselios, Vassilis

This paper deals with the relationship between decentralisation, regional economic development, and income inequality within regions. Using multiplicative interaction models and regionally aggregated microeconomic data for more than 100,000 individuals in the European Union (EU), it addresses two main questions. First, whether fiscal and political decentralisation in Western Europe has an effect on within regional interpersonal inequality. Second, whether this potential relationship is mediated by the level of economic development of the region. The results of the analysis show that greater fiscal decentralisation is associated with lower interpersonal income inequality, but as regional income rises, further decentralisation is connected to a lower decrease in inequality. This finding is robust to the measurement and definition of income inequality, as well as to the weighting of the spatial units by their population size.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8575.

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Date of creation: Sep 2011
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Handle: RePEc:cpr:ceprdp:8575
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  1. Jorge Martinez-Vazquez & Robert McNab, 2001. "Fiscal Decentralization and Economic Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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  4. Andreas P. Kyriacoua & Oriol Roca-Sagalésb, 2010. "Fiscal and Political Decentralization and Government Quality," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1005, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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  10. Pranab Bardhan & Dilip Mookherjee, 2006. "Decentralisation and Accountability in Infrastructure Delivery in Developing Countries," Economic Journal, Royal Economic Society, vol. 116(508), pages 101-127, 01.
  11. Neyapti, Bilin, 2006. "Revenue decentralization and income distribution," Economics Letters, Elsevier, vol. 92(3), pages 409-416, September.
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  13. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
  14. Raymond J.G.M. Florax & Hendrik Folmer & Sergio J. Rey, 2002. "Specification Searches in Spatial Econometrics: The Relevance of Hendry's Methodology," Urban/Regional 0202001, EconWPA.
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  16. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
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