Toward Inclusive Growth

Abstract

Economic and social cohesion at a regional level is one of the main objectives of the European Union (EU). The European regional development policy aims to promote a harmonious, balanced, and sustainable development through inclusive growth. Yet, while economic cohesion, proxied by gross domestic product (GDP) per capita, has attracted significant attention with most studies finding little regional convergence since 1985, social cohesion has been virtually ignored. This article tries to cover this gap by asking the question of whether regional convergence in social welfare, measured by Amartya Sen’s welfare index, has taken place across regions of the EU-15. Using panel data models with or without spatial interaction effects, we find that the absence of convergence in GDP per capita is not matched in terms of social welfare. Welfare levels have converged significantly across European regions and this convergence has been built on a series of structural and institutional factors, among which female participation in the labor force is the most relevant.