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Interregional redistribution, growth and convergence

Damiaan Persyn and Koen Algoed

No 547232, Working Papers of VIVES - Research Centre for Regional Economics from KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics

Abstract: Even in the absence of an explicit regional policy, countries redistribute substantial amounts of wealth between regions through taxation and social security. Using data on 140 European regions between 1995 and 2007, this paper nds that interregional income redistribution leads to lower regional economic growth and to slower within-country convergence. This may explain the observed lack of within-country convergence in the EU, in contrast to relatively fast between-country convergence where such redistributive schemes do not exist. The results suggest that investment in transport infrastructure or human capital offer better means to foster both regional growth and convergence.

Keywords: solidarity; regions; economic growth; redistribution; inequality; convergence (search for similar items in EconPapers)
Date: 2011
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Published in VIVES discussion paper, 2009/4 , pages 1-37

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