Income Inequality, Decentralisation and Regional Development in Western Europe

33 Pages Posted: 21 Sep 2011

See all articles by Andrés Rodríguez-Pose

Andrés Rodríguez-Pose

London School of Economics & Political Science (LSE) - Department of Geography and Environment

John Tomaney

University of Newcastle

Andy Pike

University of Newcastle

Gianpiero Torrisi

University of Portsmouth - Faculty of Business - Department of Economics

Vassilis Tselios

London School of Economics & Political Science (LSE) - Department of Economics; Newcastle University - Centre for Urban and Regional Development Studies

Date Written: September 2011

Abstract

This paper deals with the relationship between decentralisation, regional economic development, and income inequality within regions. Using multiplicative interaction models and regionally aggregated microeconomic data for more than 100,000 individuals in the European Union (EU), it addresses two main questions. First, whether fiscal and political decentralisation in Western Europe has an effect on within regional interpersonal inequality. Second, whether this potential relationship is mediated by the level of economic development of the region. The results of the analysis show that greater fiscal decentralisation is associated with lower interpersonal income inequality, but as regional income rises, further decentralisation is connected to a lower decrease in inequality. This finding is robust to the measurement and definition of income inequality, as well as to the weighting of the spatial units by their population size.

Keywords: Europe, fiscal and political decentralization, income inequality, income per capita, interaction, regions

JEL Classification: D31, O15, O18, R13, R58

Suggested Citation

Rodríguez-Pose, Andrés and Tomaney, John and Pike, Andy and Torrisi, Gianpiero and Tselios, Vassilis, Income Inequality, Decentralisation and Regional Development in Western Europe (September 2011). CEPR Discussion Paper No. DP8575. Available at SSRN: https://ssrn.com/abstract=1931084

Andrés Rodríguez-Pose

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

John Tomaney

University of Newcastle ( email )

5 Barrack Road
Devonshire Building
NEWCASTLE UPON TYNE, NE1 7RU
United Kingdom

Andy Pike

University of Newcastle ( email )

Centre for Urban and Regional Development Studies
(CURDS)
England NE1 7RU
United Kingdom

Gianpiero Torrisi

University of Portsmouth - Faculty of Business - Department of Economics ( email )

Portsmouth PO4 8JF
United Kingdom

Vassilis Tselios

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Newcastle University - Centre for Urban and Regional Development Studies

Newcastle NE1 7RU
United Kingdom

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