DP8951 Structural Reforms and Regional Convergence

Author(s): Natasha Xingyuan Che, Antonio Spilimbergo
Publication Date: April 2012
Keyword(s): economic growth, income inequality, regional convergence, structural reforms
JEL(s): J68, O11, O18, O25, O33
Programme Areas: International Macroeconomics, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8951

Which structural reforms affect the speed the regional convergence within a country? We found that domestic financial development, trade/current account openness, better institutional infrastructure, and selected labor market reforms facilitate regional convergence. However, these reforms have mixed effects on the growth of regions closer to the country?s development frontier. We also document that regional income disparity and average income are inversely correlated across countries so that speeding up regional convergence increases national income. We also present a theoretical model to discuss these results.