Multi-dimensional regional inequality as an alternative allocation mechanism For EU Structural Funds remittances: The case of Spain and Hungary

Abstract

We propose a multidimensional approach to regional inequality as an alternative allocation mechanism for EU Structural Funds remittances based on per capita GDP, particularly after EU enlargement. The indicators of regional inequality are combined to a composite index by means of Maasoumi's aggregator function. We propose Partial Common Principal Component Aanalysis as the estimator of the weights for the aggregator function. Application of the multidimensional approach to Spain shows that there are substantial differences between the rankings of the regions obtained by means of the multidimensional approach and the traditional approach based on per capita GDP. For Hungary, which is less developed than Spain, the rankings differ less.