The relationship between Regional Growth and Regional Inequality in EU and transition countries - a Spatial Econometric Approach
Is inequality good or bad for growth? This issue, with its important political bearings, has attracted much attention in the past in the economic literature. Starting from the seminal work of Kuznet (1955), in the literature there is some empirical evidence that economies with unequal distribution of income grow faster than those with an even income distribution. Such a belief has been heavily criticised by recent studies, and some contrasting views, supported by empirical evidence, were expressed e.g. by Aghion et al. (1999). Barro (2000) also argues in this direction, but empirically found little overall relation between income inequality on one side and growth rates and investment on the other. The debate, thus, seems still open. In our analysis we aim at investigating whether space and spatial relationships play a significant role in the specification of the relationship between regional inequality and regional growth. In particular, we analyse the case of European Regions, including the transition countries that recently joined the EU. In the empirical analysis, we make use of spatial panel data models, as they let us consider both time-invariant country specific fixed-effects and spatial dependence. By controlling for omitted variables and for spatial dependence we can be more confident that the estimated coefficient measures exactly the impact of inequality on the growth process.
|Date of creation:||Aug 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Welthandelsplatz 1, 1020 Vienna, Austria|
Web page: http://www.ersa.org
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rodrik, Dani & Alesina, Alberto, 1994.
"Distributive Politics and Economic Growth,"
4551798, Harvard University Department of Economics.
- N. Gregory Mankiw & David Romer & David N. Weil, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(2), pages 407-437.
- Panizza, Ugo, 2002. "Income Inequality and Economic Growth: Evidence from American Data," Journal of Economic Growth, Springer, vol. 7(1), pages 25-41, March.
- Magrini, Stefano, 1999. "The evolution of income disparities among the regions of the European Union," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 257-281, March.
- Hongyi Li & Heng-fu Zou, 1998.
"Income Inequality Is Not Harmful for Growth: Theory and Evidence,"
CEMA Working Papers
74, China Economics and Management Academy, Central University of Finance and Economics.
- Li, Hongyi & Zou, Heng-fu, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-34, October.
- Florax, Raymond & Folmer, Henk, 1992.
"Specification and estimation of spatial linear regression models : Monte Carlo evaluation of pre-test estimators,"
Regional Science and Urban Economics,
Elsevier, vol. 22(3), pages 405-432, September.
- Florax, R. & Folmer, H., 1991. "Specification and Estimation of Spatial Linear Regression Models: Monte Carlo Evaluation of Pre-Test Estimator," Mansholt Working Papers 1991-4, Wageningen University, Mansholt Graduate School of Social Sciences.
- Abhijit V. Banerjee & Esther Duflo, 2000.
"Inequality and Growth: What Can the Data Say?,"
NBER Working Papers
7793, National Bureau of Economic Research, Inc.
- Enrique Lopez Bazo & Esther Vaya Valcarce & Antonio Jose Mora & Jordi Surinach Caralt, 1997. "Regional economic dynamics and convergence in the european union," Working Papers in Economics 12, Universitat de Barcelona. Espai de Recerca en Economia.
- Roland Benabou, 1996.
"Inequality and Growth,"
NBER Working Papers
5658, National Bureau of Economic Research, Inc.
- Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
- Branko Milanovic, 1999. "Explaining the increase in inequality during transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 299-341, July.
- Persson, Torsten & Tabellini, Guido, 1994.
"Is Inequality Harmful for Growth?,"
American Economic Review,
American Economic Association, vol. 84(3), pages 600-621, June.
- Sergio J. Rey & Mark V. Janikas, 2005. "Regional convergence, inequality, and space," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 155-176, April.
- 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.
- Giuseppe Arbia & Gianfranco Piras, 2005.
"Convergence in per-capita GDP across European regions using panel data models extended to spatial autocorrelation effects,"
ISAE Working Papers
51, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
- Giuseppe Arbia & Gianfranco Piras, 2004. "Convergence in per-capita GDP across European regions using panel data models extended to spatial autocorrelation effects," ERSA conference papers ersa04p524, European Regional Science Association.
- Aghion, Philippe & Caroli, Eve & Garcia-Penalosa, Cecilia, 1999.
"Inequality and economic growth: the perspective of the new growth theories,"
CEPREMAP Working Papers (Couverture Orange)
- Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
- Aghion, Philippe & Caroli, Eve & GarcÃa-PeÃ±alosa, Cecilia, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Scholarly Articles 12502063, Harvard University Department of Economics.
- Barro, R.J. & Sala-I-Martin, X., 1991.
"Convergence Across States and Regions,"
629, Yale - Economic Growth Center.
- Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
- Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
- Takahiro Akita, 2003. "Decomposing regional income inequality in China and Indonesia using two-stage nested Theil decomposition method," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 37(1), pages 55-77, 02.
- George Petrakos & Andrés Rodríguez-Pose & Antonis Rovolis, 2005. "Growth, integration, and regional disparities in the European Union," Environment and Planning A, Pion Ltd, London, vol. 37(10), pages 1837-1855, October.
- Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
- George C. Petrakos, 1996. "The Regional Dimension of Transition in Central and East European Countries: An Assessment," Eastern European Economics, M.E. Sharpe, Inc., vol. 34(5), pages 5-38, October.
- Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
- repec:dau:papers:123456789/10091 is not listed on IDEAS
- Carlos R. Azzoni, 2001. "Economic growth and regional income inequality in Brazil," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 35(1), pages 133-152.
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa05p168. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)
If references are entirely missing, you can add them using this form.