Growth and Convergence-Divergence Trends in the European Union

This paper proposes a new framework for analysis of the determinants of regional income inequality. Using NUTS III data for the EU-27 countries in the period 1995-2004, it provides evidence that regional inequalities in the EU countries follow a pro-cyclical pattern, while spread effects appear only at advanced levels of development. Market-driven processes are found to increase inequalities, while public policies tend partly to off-set the cumulative effects of growth on space. The paper also provides evidence on the impact of EU integration, as well as the impact of structural change on regional inequalities. Its findings may have significant implications for theory and policy. Keywords: regional inequalities, convergence, growth, development JEL classification codes: R10, R11, R58<em>