Economic geographers and the limelight: The reaction to the 2009 World Development Report

The reaction of economic geographers to the World Bank's World Development Report 2009 – Reshaping Economic Geography – has so far been a corporatist turf-protecting exercise. The report has been dismissed as the work of economists who completely ignore a rich tradition of work by "proper" economic geographers. However, this negative response has prevented geographers from engaging constructively with the World Bank's analysis and proposals. In this note I argue that, while the report presents an accurate diagnosis of recent development trends and should be praised for its flexibility in providing numerous policy alternatives, geographers can significantly contribute to promote a discussion around two key issues in the report: its treatment of institutions and its recommendation of spatially-blind policies.

Do institutions matter for regional development?

This paper discusses whether institutions matter for regional development and how to integrate them in regional development strategies. It finds that while institutions are crucial for economic development, generating an institution-based regional development strategy is likely to be undermined by the lack of definition of what are adequate, solid, and efficient institutions. Problems related to the measurement of institutions, to their space and time variability, to the difficulties in establishing the right mix of formal and informal institutions, and to the endogeneity between institutions and economic development make one-size-fits-all approaches to operationalizing institutions difficult. Development strategies specifically tailored to the conditions of different regional institutional environments across regions may yield greater returns.

Infrastructure endowment and investment as determinants of regional growth in the European Union

This paper analyses the role of infrastructure endowment and investment in the genesis of regional growth in the European Union. It assesses the economic effects of the existence and improvement of transport networks in light of their interactions with innovation and local socio-economic conditions. The analysis accounts for spatial interactions between different regions in the form of spillovers and network externalities. The regression results highlight the impact of infrastructural endowment on regional economic performance, but also the weak contribution of additional investment. Regions having good transport infrastructure endowment and being well connected to regions with similar good endowments tend to grow faster. However, investment in infrastructure within a region or in neighbouring regions seems to leave especially peripheral regions more vulnerable to competition. Furthermore, the positive impact of infrastructure endowment on growth tends to wane quickly and is weaker than that of, for example, the level of human capital

Individual earnings and educational externalities in the European Union

This paper examines whether differences in educational externalities affect individual earnings across regions in the EU. Using microeconomic data from the European Community Household Panel, the analysis relies on spatial economic analysis in order to determine to what extent differences in individual earnings are the result of (a) the educational attainment of the individual, (b) the educational attainment of the other members of the household he/she lives in, (c) the educational endowment of the region where the individual lives, or (d) the educational endowment of the neighbouring regions. The results highlight that, in addition to the expected positive returns of personal educational attainment, place-based regional and supra-regional educational externalities generate significant pecuniary benefits for workers. These findings are robust to the inclusion of different individual, household, and regional control variables.individual earnings; educational attainment; externalities; households; regions; Europe

Welfare regimes and the incentives to work and get educated

This paper examines whether differences in welfare regimes shape the incentives to work and get educated. Using microeconomic data for more than 100,000 European individuals, the results show that welfare regimes make a difference for wages and education. First, people- and household-based effects (internal returns to education and household wage and education externalities) generate socioeconomic incentives for people to get an education and work, which are stronger in countries with the weakest welfare systems, i.e. those with what is known as 'Residual' welfare regimes (Greece, Italy, Spain and Portugal). Second, place-based effects, and more specifically differences in regional wage per capita and educational endowment and in regional interpersonal income and educational inequality, also influence wages and education in different ways across welfare regimes. Place-based effects have the greatest incidence in the Nordic Social-Democratic welfare systems. These results are robust to the inclusion of a large number of people- and place-based controls.education; employment; wages; welfare; regions; European Union

Education and Income Inequality in the Regions of the European Union

This paper provides an empirical study of the determinants of income inequality across regions of the EU. Using the European Community Household Panel data set for 102 regions over the period 1995-2000, it analyses how microeconomic changes in human capital distribution affect income inequality not only for the whole of the population but also for normally working people. Human capital distribution is measured in terms of both educational attainment as well as educational inequality. Income and educational inequalities are calculated by a generalised entropy index (Theil index). Different static and dynamic panel data analyses are conducted in order to reduce measurement error on inequalities and minimise potential problems of omitted-variable bias. Taking into account the specification tests applied to the estimated models, the regression results reveal that, while the relationship between income inequality and income per capita is positive, the long-run relationship between income inequality and educational attainment is not statistically significant. This paper also agrees with the current belief that educational inequality has a positive relationship with income inequality. Across European regions high levels of inequality in educational attainment are associated with higher income inequality. This may be interpreted as the responsiveness of the EU labour market to differences in qualifications and skills. The above results are robust to the definition of income distribution. Other results indicate that population ageing and inactivity are sensitive to the specification model, while work access and latitude are negatively associated to income inequality. Urbanisation has a negative impact on inequality but for the whole of the population only. Furthermore, the relationship between unemployment and income inequality is positive. Female participation in the labour force is negatively associated with inequality and explains a major part of the variation in inequality. Finally, as expected, income inequality is lower in democratic welfare states, in Protestant areas, and in regions with Nordic family structures (i.e. Swedish and Danish regions).DYNREG, Income inequality, educational attainment, educational inequality, regions, Europe

Inequalities in Income and Education and Regional Economic Growth in Western Europe

Does inequality matter for regional growth? This paper addresses this question by using microeconomic data for more than 100,000 individuals over a period of 5 years from the European Community Household Panel (ECHP) dataset, complemented with Eurostat's Regio data, in order to examine the impact of income and educational distribution on regional economic growth. Educational distribution is measured in terms of educational achievement as well as educational inequality, and income distribution in terms of income per capita and income inequality, not only for the whole of the population, but also for normally working people. Our results indicate that, given existing levels of inequality, an increase in a region's income and educational inequality has a significant positive relationship with subsequent economic growth. Nevertheless, the reverse does not seem to be the case, as we do not find a causal link between growth and changes in inequality levels. Despite the fact that educational achievement is positively correlated with economic growth, the results also suggest that inequalities in income and educational attainment levels matter more for economic performance than average income and educational attainment, respectively. Initial income levels, in contrast, are irrelevant for regional economic growth as they are very sensitive to the inclusion of control variables.Income inequality, educational attainment, educational inequality, economic growth, regions, Europe/growth

Can policy make us happier? Individual characteristics, socioeconomic factors, and life satisfaction in Central and Eastern Europe

In the last decade, Central and Eastern European (CEE) countries have witnessed a rapid economic convergence vis-à-vis Western Europe. However, this rapid growth has not been matched by a similarly rapid increase in life satisfaction, which has remained low in the European context. This paper sets out to address this conundrum, by looking at the individual and macro-level determinants of individual life satisfaction in ten CEE countries. The results highlight that while Central and Eastern Europeans share the same individual determinants of happiness as people in the West (despite some significant cross-country variation), macroeconomic and institutional differences are the key factors behind the lack of convergence in life satisfaction. On the macroeconomic side, GDP growth is still a source of increasing well-being, but the happiness bonus associated with it is becoming smaller. The different levels of individual happiness in CEE are therefore mostly determined by institutional factors such as corruption, government spending and decentralisation, making policies aimed at enhancing institutional quality capable of bringing about substantial improvements in the overall life satisfaction of the people in the region.Happiness; Convergence; Easterlin paradox; Institutions; Corruption; Decentralisation; Central and Eastern Europe