As readers would've guessed by now, this blog has stopped being updated over the last three months. Three months ago, I became a public servant at the Bank of Canada and did not wish for my politically opinionated posts to be a source of attention as a public servant.
Saturday, September 20, 2014
Thursday, May 15, 2014
Regional convergence in the EU fattens the economic pie
European urban regions are economically converging, flattening out income across the continent. Interestingly, this greater equity of income distribution does not come at the cost of economic growth. The proverbial economic pie both got split more equally and grew bigger.
European regional convergence
A measure of the convergence of the EU regions is the volatility of purchasing power standards per inhabitant as a percentage of the EU average of more than 240 regions. The reasoning is the following: if the variance of the distribution is lowering, then data is more concentrated around the average, which in turn means that differences between regions are dwindling. This trend towards a lower variance confirms anecdotal evidence at the regional level and national convergence. I prepared an Excel file that presents various indicators related to regional convergence.
Source: Eurostat met_e3gdp and own calculations
European national convergence
At the national level, most countries whose expenditure index was above 100 in 2000 got lower in 2010 whereas the opposite trend is true.
Did income distribution equity come at the price of growth?
In Europe, purchasing power parity rose by 38% between 2000 and 2010 while Canada reported a 35% growth. Japan and the United States lagged behind at 32%. Although it might sound counter-intuitive to classical economists, the rising equity and convergence of European economies did not come at the cost of a trade-off with growth. This should be no surprise to anyone who's read the IMF paper concluding that moderate redistribution actually fosters growth. In other words, the pie both got split more equally and got bigger.
Poland
In Poland, all regions have converged towards the EU average between 2000 and 2010. Warsaw's purchasing power standard as a percentage of the EU average skyrocketed from 96% to 130% while Wroclaw's performance came second, leaping from 56% to 77%. This Polish catching-up occurred in a context where all reported regions' purchasing power raised between 2000 and 2010. The Szczecin region converged to EU levels significantly slower than other regions, closing the gap by only 3.9 points of percentage.
Source: Eurostat met_e3gdp
Note: for better readability, Warsaw and some other regions were not included in the chart
Purchasing Power Standard per inhabitant in percentage of the EU average
Source: Eurostat met_e3gdp
Data sources
Eurostat: http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
Regional purchasing power: met_e3gdp for purchasing parity and per capita income for European regions. Eurostat
Country purchasing power: Eurostat: [prc_ppp_ind]
Purchasing power parity country comparison: World Economic Outlook: http://www.imf.org/external/pubs/ft/weo/2014/01/weodata/index.aspx
European regional convergence
A measure of the convergence of the EU regions is the volatility of purchasing power standards per inhabitant as a percentage of the EU average of more than 240 regions. The reasoning is the following: if the variance of the distribution is lowering, then data is more concentrated around the average, which in turn means that differences between regions are dwindling. This trend towards a lower variance confirms anecdotal evidence at the regional level and national convergence. I prepared an Excel file that presents various indicators related to regional convergence.
European national convergence
At the national level, most countries whose expenditure index was above 100 in 2000 got lower in 2010 whereas the opposite trend is true.
Volume indices of real expenditure per
capita in PPS (EU-27 = 100)
2000
|
2010
|
2010-2000
|
|
Belgium
|
126
|
120
|
-6
|
Bulgaria
|
28
|
44
|
16
|
Czech Republic
|
71
|
81
|
10
|
Denmark
|
131
|
128
|
-3
|
Germany
|
117
|
119
|
2
|
Estonia
|
45
|
64
|
19
|
Ireland
|
132
|
128
|
-4
|
Greece
|
84
|
87
|
3
|
Spain
|
97
|
99
|
2
|
France
|
115
|
109
|
-6
|
Italy
|
117
|
103
|
-14
|
Cyprus
|
87
|
97
|
10
|
Latvia
|
36
|
55
|
19
|
Lithuania
|
39
|
62
|
23
|
Luxembourg
|
244
|
262
|
18
|
Hungary
|
54
|
66
|
12
|
Malta
|
87
|
86
|
-1
|
Netherlands
|
134
|
130
|
-4
|
Austria
|
132
|
126
|
-6
|
Poland
|
48
|
63
|
15
|
Portugal
|
81
|
80
|
-1
|
Source: Eurostat prc_ppp_ind
Did income distribution equity come at the price of growth?
In Europe, purchasing power parity rose by 38% between 2000 and 2010 while Canada reported a 35% growth. Japan and the United States lagged behind at 32%. Although it might sound counter-intuitive to classical economists, the rising equity and convergence of European economies did not come at the cost of a trade-off with growth. This should be no surprise to anyone who's read the IMF paper concluding that moderate redistribution actually fosters growth. In other words, the pie both got split more equally and got bigger.
Country
|
2010-2000 growth of Purchasing Power Parity
|
Canada
|
35%
|
France
|
29%
|
Germany
|
37%
|
Italy
|
22%
|
Japan
|
32%
|
Poland
|
81%
|
Spain
|
30%
|
United Kingdom
|
37%
|
United States
|
32%
|
European Union
|
38%
|
Source: WEO April 2014
How did economic convergence happen?
Economic convergence came as a result of catching-up by poorer countries who benefited from EU membership through the Structural Funds and Cohesion Fund, access to the common market and a safe investment environment that attracted foreign investment and foreign technologies.
In Poland, all regions have converged towards the EU average between 2000 and 2010. Warsaw's purchasing power standard as a percentage of the EU average skyrocketed from 96% to 130% while Wroclaw's performance came second, leaping from 56% to 77%. This Polish catching-up occurred in a context where all reported regions' purchasing power raised between 2000 and 2010. The Szczecin region converged to EU levels significantly slower than other regions, closing the gap by only 3.9 points of percentage.
Source: Eurostat met_e3gdp
Note: for better readability, Warsaw and some other regions were not included in the chart
Purchasing Power Standard per inhabitant in percentage of the EU average
2000
|
2010
|
Difference 2010-2000
|
|
Warszawa
|
96
|
130
|
34.0
|
Lódz
|
51
|
69
|
17.8
|
Kraków
|
53
|
69
|
15.5
|
Wroclaw
|
56
|
77
|
21.3
|
Poznan
|
77
|
96
|
19.2
|
Gdansk
|
57
|
70
|
12.7
|
Szczecin
|
62
|
66
|
3.9
|
Bydgoszcz - Torún
|
58
|
67
|
9.3
|
Lublin
|
44
|
55
|
10.9
|
Katowice
|
56
|
72
|
16.6
|
Bialystok
|
43
|
53
|
9.7
|
Kielce
|
40
|
51
|
11.0
|
Rzeszów
|
37
|
50
|
12.9
|
Opole
|
45
|
56
|
11.6
|
Czestochowa
|
42
|
51
|
8.8
|
Radom
|
35
|
47
|
11.4
|
Bielsko-Biala
|
52
|
61
|
9.1
|
Tarnów
|
32
|
40
|
8.1
|
Data sources
Eurostat: http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
Regional purchasing power: met_e3gdp for purchasing parity and per capita income for European regions. Eurostat
Country purchasing power: Eurostat: [prc_ppp_ind]
Purchasing power parity country comparison: World Economic Outlook: http://www.imf.org/external/pubs/ft/weo/2014/01/weodata/index.aspx
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