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Is There A Trade-off Between Regional Growth and National Income? Theory and Evidence from the EU

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  • Young-Bae Kim

    (University of Surrey)

Abstract

The paper theoretically and empirically investigates the effect of changes in national labourmarket conditions on regional growth from the point of view of local economies. The mechanism of efficiency wage is introduced to a growth model and it is argued that local regions belonging to richer countries would experience slower economic growth than those in poorer countries, ceteris paribus. The model emphasises the process of interregional wage dependence in which national average wage or income plays an important role in determining regional wages and growth. The empirical findings from EU regional data also suggest that national income is significantly and negatively associated with regional growth. The adverse effect of national income on regional growth is also observed to be stronger among richer regions whose income is above the national average.

Suggested Citation

  • Young-Bae Kim, 2008. "Is There A Trade-off Between Regional Growth and National Income? Theory and Evidence from the EU," School of Economics Discussion Papers 1008, School of Economics, University of Surrey.
    • Handle: RePEc:sur:surrec:1008
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    File URL: https://repec.som.surrey.ac.uk/2008/DP10-08.pdf
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    References listed on IDEAS

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    Cited by:

    1. Doran, Justin & Jordan, Declan, 2013. "Decomposing European NUTS2 regional inequality from 1980 to 2009: national and European policy implications," MPRA Paper 44805, University Library of Munich, Germany.

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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