Regional inequality and economic growth: interactions of the relationship with the level of economic development and speed of growth
The interaction of inequality and growth and the direction of causality in this relationship have been an extensively discussed topic with several questions but without clear answers both in the theoretical and empirical literature. The current paper contributes mainly into the new economic geography (NEG) literature by focusing on the member states of the European Union. The purpose of the paper is to shed light on the effect of the economic development level and speed of growth on the relationship between economic growth and regional inequality. The research hypothesis of a significant interrelation between regional inequality and economic growth is discussed based on the models of NEG. The empirical part of the paper relies on the regional data of the 27 European Union member states at the classification level NUTS 3 over the period 1996â€šÃ„Ã¬2006. The results of the empirical analysis allow us to conclude that regional inequality has a pro-cyclical character: regional inequality is as a rule higher in countries and time periods when economic growth is faster. However, this relationship varied between the countries of the EU-27 during the period under observation, depending on the development level. While in the Western European countries regional inequality and economic growth are negatively related, in the Eastern European countries regional inequality increases in the periods of fast economic growth. Relying on the NEG models, such differences can be explained by a different weight of internal and foreign markets in trade relations of countries and regions. Possibly the result also refers to disparities in congestion costs in Western and Eastern European core regions. We conclude that growth enhancing policy measures should be implemented at a different regional scale, depending on the level of economic development and growth of the countries. Growth supporting policies in poor countries should first of all concentrate on achieving sustainable national growth, not on reducing regional disparities.
|Date of creation:||Sep 2011|
|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.:
- Baldwin, Richard E., 1999.
"Agglomeration and endogenous capital,"
European Economic Review,
Elsevier, vol. 43(2), pages 253-280, February.
- Raul Livas Elizondo & Paul Krugman, 1992.
"Trade Policy and the Third World Metropolis,"
NBER Working Papers
4238, National Bureau of Economic Research, Inc.
- Charlot, Sylvie & Gaigne, Carl & Robert-Nicoud, Frederic & Thisse, Jacques-Francois, 2006.
"Agglomeration and welfare: The core-periphery model in the light of Bentham, Kaldor, and Rawls,"
Journal of Public Economics,
Elsevier, vol. 90(1-2), pages 325-347, January.
- CHARLOT, Sylvie & GAIGNE, Carl & ROBERT-Nicoud, Frederic & THISSE, Jacques-FranÃ§ois, . "Agglomeration and welfare: the core-periphery model in the light of Bentham, Kaldor, and Rawls," CORE Discussion Papers RP 1857, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- CHARLOT, Sylvie & GAIGNÃ‰, Carl & ROBERT-NICOUD, FrÃ©dÃ©ric & THISSE, Jacques, 2003. "Agglomeration and welfare : the core-periphery model in the light of Bentham, Kaldor, and Rawls," CORE Discussion Papers 2003039, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Charlot, Sylvie & Gaigné, Carl & Robert-Nicoud, Frédéric & Thisse, Jacques-François, 2004. "Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls," CEPR Discussion Papers 4715, C.E.P.R. Discussion Papers.
- Sylvie Charlot & Carl Gaigné & Frédéric Robert-Nicoud & Jacques-François Thisse, 2006. "Agglomeration and welfare: The core-periphery model in the light of Bentham, Kaldor, and Rawls," Post-Print halshs-00754181, HAL.
- Martin, Philippe & I.P. Ottaviano, Gianmarco, 1999.
"Growing locations: Industry location in a model of endogenous growth,"
European Economic Review,
Elsevier, vol. 43(2), pages 281-302, February.
- Martin, Philippe & Ottaviano, Gianmarco, 1996. "Growing Locations: Industry Location in a Model of Endogenous Growth," CEPR Discussion Papers 1523, C.E.P.R. Discussion Papers.
- Romer, Paul M, 1990.
"Endogenous Technological Change,"
Journal of Political Economy,
University of Chicago Press, vol. 98(5), pages S71-102, October.
- Paul Krugman, 1990.
"Increasing Returns and Economic Geography,"
NBER Working Papers
3275, National Bureau of Economic Research, Inc.
- Tiiu Paas & Friso Schlitte, 2006.
"Regional Income Inequality and Convergence Processes in the EU-25,"
ERSA conference papers
ersa06p229, European Regional Science Association.
- Paas, Tiiu & Schlitte, Friso, 2007. "Regional income inequality and convergence processes in the EU-25," HWWI Research Papers 1-11, Hamburg Institute of International Economics (HWWI).
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa10p938. 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.