Regional Convergence in Europe and the Role of Urban Agglomerations

Jesus Crespo Cuaresma and Martin Feldkircher
Authors registered in the RePEc Author Service: Peter Mayerhofer

Focus on European Economic Integration, 2010, issue 3, 63-78

Abstract: Using data for EU-27 NUTS 2 regions and major cities, we evaluate empirically the role of urban growth spillovers as a determinant of income dynamics at the regional level. We go beyond the empirically well documented static relationship between national income and productivity in urban agglomerations. We use spatial regression models to quantify the effect of city growth spillovers on neighboring regions and assess the interrelationship between urban and regional growth. Our results indicate that urban growth spillovers play an important role in explaining differences in per capita income growth across European regions: Strong income growth in urban agglomerations provides an additional growth bonus for neighboring regions. This effect is very homogeneous across regions in Western and Eastern Europe. Our results indicate that the industrial composition of the agglomeration also matters for regional growth: Regions hosting urban agglomerations with a relatively high specialization in the primary sector as well as in fuels and chemicals tend to experience lower rates of economic growth. Our study is particularly relevant for policymakers since it indicates a trade-off between fostering income convergence at the regional level on the one hand and spurring national growth on the other hand.

Keywords: Determinants of economic growth; European regions; urban growth; spatial error (search for similar items in EconPapers)
JEL-codes: C21 O18 O52 R11 (search for similar items in EconPapers)
Date: 2010
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