On the determinants of convergence and divergence processes in Spain

This paper studies the dynamics of convergence and divergence in Spain over the period 1965-1995. We analyse the evolution of the per capita income distribution across Spanish provinces and estimate the effects on this evolution of factors such as private, human and public capital, and an industrialisation index. We show that after a period of absolute convergence over the 1960s and early 1970s, the provinces polarised (club convergence) during the 1980s. This polarisation process preceded a period of divergence among clubs, which began to appear during the 1990s. By estimating counterfactual densities, we show that private capital accumulation and education at graduate level can account for a relevant fraction of the actual dispersion and polarisation of incomes. We also find that public capital has reduced inequalities, especially in recent years, through redistribution of incomes rather than by increasing productivity. (Copyright: Fundación SEPI)