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The geography of inequalities in Europe

  • Philippe Martin

This paper analyses some of the theoretical and empirical arguments that serve to legitimate regional policies in Europe. We start by reviewing the existing evidence that European integration has led to a process of convergence between countries but not between regions inside countries and suggest some mechanisms through which this can happen. Taking the example of France, we show that in the past twenty years regional divergence in production has indeed occurred. However, the geography of incomes has, during the same period, become more equal producing a “scissors effect” between the geographies of production and income. This suggests that transfers, which have nothing to do with regional policies, have, at least in France, more than compensated the increase in production inequality. Hence, “regional convergence” is not a synonym of “regional cohesion” at least at the national level. We then review evidence on a possible trade-off between growth and regional inequalities to suggest that efficiency motives can not easily be used to defend regional policies. Both evidence and theory suggest that regional concentration leads to efficiency gains. This also implies that the EU is faced with a choice it has tried to avoid until now. Either, it puts its effort in slowing or even reversing the process of spatial economic concentration at the national level or it concentrates on policies to speed up the convergence process between poor and rich countries. Finally, we analyse the relation between spatial and social inequalities. We report empirical evidence for Europe that suggests a strong empirical relation between the two: even after controlling for transfers and other possible determinants of individual inequalities, we find that countries with more regional inequalities are also those with more individual inequalities.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/9283.

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Date of creation: 2005
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Publication status: Published in Swedish Economic Policy Review, 2005, pp.83-108
Handle: RePEc:spo:wpmain:info:hdl:2441/9283
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  1. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers 120, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Karen Helene Midelfart-Knarvik & Henry G. Overman, 2002. "Delocation and European integration: is structural spending justified?," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 321-359, October.
  3. Bernard G. Funck & Lodovico Pizzati, 2003. "European Integration, Regional Policy, and Growth," World Bank Publications, The World Bank, number 15144, June.
  4. Gilles Duranton & Vassilis Monastiriotis, 2002. "Mind the Gaps: The Evolution of Regional Earnings Inequalities in the U.K., 1982-1997," Journal of Regional Science, Wiley Blackwell, vol. 42(2), pages 219-256.
  5. Laurent Davezies, 1999. "Un essai de mesure de la contribution des budgets des pays membres à la cohésion européenne," Économie et Prévision, Programme National Persée, vol. 138(2), pages 179-196.
  6. Martin, Philippe, 1998. "Public Policies, Regional Inequalities and Growth," CEPR Discussion Papers 1841, C.E.P.R. Discussion Papers.
  7. Fuest, Clemens & Huber, Bernd, 2000. "Why do governments subsidise investment and not employment?," Munich Reprints in Economics 20295, University of Munich, Department of Economics.
  8. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  9. J.A. Duro, 2004. "Regional Income Inequalities in Europe: An Updated Measurement and Some Decomposition Results," Working Papers wpdea0411, Department of Applied Economics at Universitat Autonoma of Barcelona.
  10. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," NBER Working Papers 3993, National Bureau of Economic Research, Inc.
  11. Vassilis Monastiriotis, 2003. "Union Retreat and Regional Economic Performance: the UK in the 1990s," Urban/Regional 0302006, EconWPA.
  12. Matthieu Crozet & Pamina Koenig, 2005. "The Cohesion vs Growth Tradeoff - Evidence from EU Regions (1980-2000)," ERSA conference papers ersa05p716, European Regional Science Association.
  13. Antonio Ciccone, 1998. "Agglomeration-effects in Europe," Economics Working Papers 499, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 1999.
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