The Effects of Integration on Regional Disparities: Convergence, Divergence or Both?

Abstract

In this paper, I identify some stylized facts characterizing regional evolution in Europe during the eighties. In particular, I provide evidence of the existence of convergence clubs based on regional specialization. Afterward, I give an explanation of this empirical evidence based on the process of deeper integration and the different specialization of European regions. In my model, I explore the effects of integration between two symmetric countries characterized by strong regional disparities that originate from a lower productivity in the high-tech sector. If regions with different industrial structure do not benefit in the same measure from international knowledge spillovers, economic integration exacerbates disparities among the regions of a country, even if it accelerates growth and brings convergence between countries. Moreover, regions with a consistent high-tech sector grow faster and converge even if they have initially different productivity levels.

Note: Dr. Giannetti will be at the Banca d'Italia in late April or early May 1999; before that time she can be reached at the Dept. of Economics, UCLA, Mailto:[e-mail]

JEL Classification: O52, O41, O18, F15, F4