Working Paper: CEPR ID: DP8951
Authors: Natasha Xingyuan Che; Antonio Spilimbergo
Abstract: 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.
Keywords: economic growth; income inequality; regional convergence; structural reforms
JEL Codes: J68; O11; O18; O25; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| domestic financial development (O16) | regional convergence (R11) |
| trade openness (F43) | regional convergence (R11) |
| lower unemployment benefits (J65) | higher growth rates in less developed regions (O53) |
| labor tax wedges (J39) | higher growth rates in less developed regions (O53) |
| lower unemployment benefits (J65) | detrimental effects on more advanced regions (R11) |
| labor tax wedges (J39) | detrimental effects on more advanced regions (R11) |
| improvements in institutional quality (O17) | regional growth (R11) |