Interregional redistribution, growth and convergence

Damiaan Persyn and Koen Algoed

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: Countries redistribute substantial amounts of wealth between regions through taxation and social security, even in the absence of an explicit regional policy. Economic theory suggests such redistribution might be distorting. This paper indeed finds that more redistribution leads to subsequent lower growth, but also slower interregional convergence. This may explain the observed lack of within-country convergence in the EU, in contrast to faster convergence between countries where such redistributive schemes do not exist. In contrast, investment in infrastructure or human and physical capital is found to foster both growth and convergence.

Keywords: income redistribution; inequality; regional convergence (search for similar items in EconPapers)
JEL-codes: H3 O47 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-fdg and nep-geo
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Citations: View citations in EconPapers (5)

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Working Paper: Interregional redistribution, growth and convergence (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:vivwps:4

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