Growth, Integration, and Regional Disparities in the European Union

Abstract

In this paper we challenge the ability of the conventional methods initiated by Barro and Sala-i-Martin in the early 1990s to detect actual convergence or divergence trends across countries or regions and suggest an alternative dynamic framework of analysis, which allows for a better understanding of the forces in operation. With the use of a SURE model and time-series data for eight European Union (EU) member states, we test directly for the validity of two competing hypotheses: the neoclassical (NC) convergence hypothesis originating in the work of Solow and the cumulative causation hypothesis stemming from Myrdal's theories. We also account for changes in the external environment, such as the role of European integration on the level of regional disparities. Our findings indicate that both short-term divergence and long-term convergence processes coexist. Regional disparities are reported to follow a procyclical pattern, as dynamic and developed regions grow faster in periods of expansion and slower in periods of recession. At the same time, significant spread effects are also in operation, partly offsetting the cumulative impact of growth on space. Similar results are obtained from the estimation of an intra-EU model of disparities at the national level, indicating that the forces in operation are independent of the level of aggregation. Our findings challenge the view of economic growth as the main driver for a reduction of regional disparities and contribute to the growing scientific evidence that points towards the need to rethink current EU-wide regional development policies.

Regional Growth and National Development: Transition in Central and Eastern Europe and the Regional Kuznets Curve in the East and the West

“…In an analysis that departs somewhat from the neoclassical approach, Petrakos et al (2005b) find simultaneous evidence of short-run divergence and long-run convergence, with the level of disparities moving pro-cyclically along an overall convergent trend. Kallioras (2010) shows that convergence trends are conditioned on the size of the regional economies, pointing to the possibility of club convergence.…”

Peripherality and Integration: Industrial Growth and Decline in the Greek Regions

“…An index of integration (PETRAKOS et al, 2005a) Most Greek regions have been traditionally specializing in labour-intensive sectors that were also becoming highly exposed to international competition from lower cost producers (Petrakos et al, 2005b). In spite of this, regional restructuring in the post EU-accession has been quite slow in Greece and has been attributed to considerable sectoral persistence in regional specialization patterns within The results of the estimation are presented in Table 4.…”

Trade Liberalisation and its Impact on Regional Development: Theoretical and Experimental Studies

“…In particular, some works employ trade openness as a control variable in the regional inequality regression and find that trade openness does not affect changes in regional inequality and is statistically insignificant. Results of some other papers argue that the result depends on the sample of countries [36].…”