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This paper challenges the ability of the conventional literature initiated by Barro and Sala-i-Martin (1991, 1992) to detect actual convergence or divergence trends across countries or regions and suggests an alternative dynamic framework of analysis, which allows for a better understanding of the forces in operation. With the use of a SURE model and time-series data for eight European Union (EU) member-states, we test directly for the validity of two competing hypotheses: the neoclassical (NC) convergence hypothesis originating in the work of Solow (1956) and the cumulative causation hypothesis stemming from Myrdal's theories (1957). We also account for changes in the external environment, such as the role of European integration on the level of inequalities. Our findings indicate that both short-term divergence and long-term convergence processes coexist. Regional inequalities are reported to follow a pro-cyclical pattern, as dynamic and developed regions grow faster in periods of expansion and slower in periods of recession. At the same time, significant spread effects are also in operation, partly offsetting the cumulative impact of growth on space. Similar results are obtained from the estimation of an intra-EU model of inequalities at the national level, indicating that the forces in operation are independent of the level of aggregation. Our findings challenge the conventional wisdom in the European Commission about the evolution of regional inequalities and have important policy implications.

Abstract This paper aims to estimate the long-term impacts of an austerity policy in the Brazilian regions. Our main contribution is to measure those effects using a dynamic interregional general equilibrium model, capturing the indirect impacts in sectors and regions, in addition to the direct effects of the expenditure cuts. The main results show that the fiscal adjustment would attenuate growth in most of the Brazilian states by 2037. Municipalities located in the poorest regions would be relatively more affected. Furthermore, the adjustment would have a negative impact on regional inequalities in all scenarios, both at the state and municipal levels.

The aim of this paper, in the context of the contemporary socio-economic changes in Serbia, is to consider changes in the regional development policy, and therefore in the approach to underdeveloped areas. A special attention is paid to regional inequality as a developmental problem since it directly influences the integrative processes, violating them, and therefore leads to side effects (economic, social, demographic, ecological, spatial, etc.). In Serbia, traditionally undeveloped areas (rural, hilly-mountainous and border/peripheral) have formed during a longer historical period, contrary to the new types of areas - municipalities ("devastated areas") that are connected to the transition period ("transition poverty"). Both appeared by cause and effect reaction to natural, socio-economic, social, demographic, cultural-civilizational and political factors.

The paper investigates a neglected aspect of regional inequality in Brazil, namely regional inequalities related to financial flows. A synthetic regional financial inequality index is proposed and calculated in a semester basis over the 02-1994/02-2000 period. The inequality measure attempts to capture to what extent deposits in a given state translate into credit operations in that locality. Two main results emerge. First, non-negligible inequality patterns emerge when one considers the segment of private banks and those are consistent with an important proportion of states with a predominantly exporting pattern, for which deposits surpasses loans in that locality. Second, if one focus on the segment of public banks, an opposite pattern appears, that is consistent with decision patterns that might have, in part, a regional development motivation. (Rev Econ Polit/GIGA)

We analyze within a spatial endogenous growth setting the impact of public policy coordination on regional inequality. Governments in each of the two symmetric regions provide a local public input that becomes globally effective due to integration. Micro-foundation of governmental behavior is based on three different coordination schemes: autarky, full or partial coordination. The "optimal" size of the local public inputs - as measured by the expenditure share ratios - differs depending upon the extent to which the governments take interregional interdependencies and feedback effects into account. The resulting spatial distribution of economic activity is driven by integration, which acts as dispersion force, and scale effects, which act as concentration force. The latter are drivers of regional inequality. Given full symmetry, local externalities cancel w.r.t to their impact on spatial concentration. We show that coordination of public decisions that base on productivity considerations unequivocally foster concentration and destabilize the spreading equilibrium. Regional inequality is thus an optimal result or put differently, the convergence goal can only be met by applying additional arguments.