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Income inequality, decentralisation and regional development in Western Europe

  • Vassilis Tselios

    (University of Groningen)

  • Andrés Rodríguez-Pose


    (IMDEA Social Sciences Institute)

  • Andy Pike


    (Newcastle University)

  • John Tomaney


    (Newcastle University)

  • Gianpiero Torrisi


    (Newcastle University)

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 Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2011-16.

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Date of creation: 16 Sep 2011
Date of revision:
Handle: RePEc:imd:wpaper:wp2011-16
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