DP1075 Regional Cohesion: Evidence and Theories of Regional Growth and Convergence

Author(s): Xavier Sala-i-Martin
Publication Date: November 1994
Keyword(s): Capital Mobility, Convergence, Endogenous Growth, Neoclassical Growth, Regional Cohesion, Regional Economic Growth
JEL(s): O40, O41, O51, O52, O53
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1075

After arguing that the concepts of b-convergence and s-convergence are independently interesting, this paper extends the empirical evidence on regional growth and convergence across the United States, Japan, and five European nations. We confirm that the estimated speeds of convergence are surprisingly similar across data sets: regions tend to converge at a speed of approximately 2% per year. We also show that the inter-regional distribution of income in all countries has shrunk over time. We then argue that, among the proposed potential explanations of this phenomenon, the one-sector neoclassical growth model and the hypothesis of technological diffusion seem to be the only ones which survive scrutiny.