An empirical study of regional convergence, inequality, and spatial dependence in the enlarged European Union

This thesis deals with regional convergence and the spatial dynamics of regional incomes in the enlarged EU. The aim is to build on prior work in the field, to investigate convergence dynamics of regions in the newest EU member states and to look at the importance of country and spatial effects in the convergence process. Examining per-capita income growth among 1309 NUTS 3-regions across the EU over 1995-2009, very slow rates of both β- and σ-convergence is found. Spatial data analysis reveals strong spatial dependence and clustering of regional incomes and growth rates across EU regions. By spatial econometric methods it is found that the spatial dependence in the convergence process is mainly contained to regions within the same country. Thus, regional growth spillovers seem to a large extent stop at country borders. Moreover, convergence in the old member states over the sample period is found to be mainly due to growth among low-income regions. Conversely, no significant convergence can be found among the newest member states. Rather these countries show evidence for increasing income inequality. This is found to be mainly attributed to increasing within-country regional income disparities.