Effect of Regional Disparities on National Economic Growth. A Spatial Panel Data Evidence From Eu Countries in 2000–2020

Abstract

Abstract The study aims to examine whether regional disparities within a country affect national economic growth. To achieve this, the study employs spatial panel data models that consider the role of geography in economic development. The analysis covers 17 EU countries with five or more regions at the NUTS 2 level, spanning from 2000 to 2020. Regional disparities are calculated using polarization measures. The findings indicate that an increase in regional disparities, in the form of a shrinking range of regions with GDP per capita close to the national average, has a negative impact on economic growth. However, the division of a country's regions into two groups (bipolarization), poor and rich, does not affect national economic performance. Furthermore, the results of robustness tests reveal that regional disparities have a detrimental effect on growth in the EU's new member countries, which joined in 2004 and later, whereas the relationship is insignificant in the case of old member states' economies. JEL CLASSIFICATION JEL: D30, R11, R58.