Inequality in Europe

Growing Differently: A Structural Classication for European NUTS-3 Regions

We document two novel stylized facts on European integration and cohesion. First, we show that the interregional income distribution, measured as GDP per capita at the NUTS-3 level, is bimodal for all considered years. Second, we demonstrate that this mixture of two log-normal distributions provides an excellent t for this interregional distribution in all considered years. We put forward two meso-level interpretations of these stylized facts, based on heterodox growth theory: The log-normality of the individual clusters hints at a stochastically multiplicative process, where growth is strongly path-dependent. This can be derived from maximum entropy considerations. However, the bimodality in the income distributions also implies two separate growth mechanisms. We show that the high-variance log-normal distribution governs the dynamics at both tails of the income distribution, which might be interpreted as the core and periphery and the low-variance variant the bulk of the distribution, thus interpretable as a semi-periphery.

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This work is part of a larger project. We currently expand the paper with respect to the time frame which we investigate to track mobility of regions within and between regimes. This will allow us to gain additional insight into growth processes and structural change.

We further consider to apply the model and classification to additional economic areas like the United States.