Regional growth and inequality in the long-run: Europe, 1900–2015

Abstract

In this paper we discuss regional income growth and inequality based on a new set of long-run data. The data cover 173 European regions in 16 countries, from 1900 to 2015. These data allow us to compare regions over time, among each other, and to other parts of the world. After some brief notes on methodology, we describe the basic patterns in the data in terms of some key dimensions: variation in the density of population and economic activity, structural change with a declining role of agriculture, the rise and fall of industry, and the long rise of services. We show how ‘fundamentals’ of institutions and geography affected income levels over the twentieth century, and describe how regional growth after 1945 turned from convergence and adjustment to shocks to divergence. In the long run we observe a U-shaped pattern of regional convergence followed by divergence, not unlike recent observations on personal income and wealth distributions.