The Cohesion vs Growth Tradeoff - Evidence from EU Regions (1980-2000)

Matthieu Crozet and Pamina Koenig

ERSA conference papers from European Regional Science Association

Abstract: This paper provides an empirical investigation of the cohesion versus growth tradeoff on European regions at a fine geographical disaggregation level. We use data on gdp per capita at the NUTS3 level for 1980-2000 to estimate the influence of income dispersion within NUTS1 on their economic growth. We analyze the existence of the tradeoff using Redding and VenablesÂ’(2004) approach. From a simple new economic geography model in which we add a technological externality in order to allow for local growth, we derive an estimable equation linking the level of factor prices in a region to the level of inequalities inside that region, as well as the regionÂ’s access to markets. Our results show a positive relation between the gdp per capita growth rate of a region and the change in the level of inequalities inside the region. Finally, an increase in market potential, as expected, has an unambiguous positive impact on local growth.

Date: 2005-08
New Economics Papers: this item is included in nep-geo
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwrsa:ersa05p716

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