Income Inequality within European Regions: Determinants and Effects on Growth

Economic inequality across Europe has been largely investigated by analyzing the determinants and dynamics of the disparities between countries and regions. Similarly, many studies have focused on inequality within European countries. So far, less attention has been devoted to economic inequality within European regions, mainly due to data shortages. The aim of this paper is to shed some light on this level of analysis. After the introductory section, the first part of the paper presents the conceptual bases of the study, examining relevant theoretical and empirical arguments about (i) the determinants of economic inequality, (ii) the relationship between economic inequality and growth, and (iii) the desirability and specificity of regional analysis. The second part of the paper, using various econometric approaches, provides evidence of the centrality of labor market qualitative and quantitative aspects and of some country-level institutional settings for regional inequality levels. As regards the effects of inequality on growth, the results suggest a positive relationship.