Economic convergence or divergence? Modeling the interregional dynamics of EU regions, 1985–1999

Abstract.

In this paper we start from a continuous time framework derived from the classical predator-prey model in order to analyze the recent dynamics of regional evolution in the EU. The model describes a system of interrelated units obeying a complex functional dynamics that at any moment may encompass divergent forces. After briefly reviewing the modeling framework presented elsewhere (Arbia and Paelinck 2002), we consider the dynamics of per-capita income in 119 NUTS-2 European regions in the years 1985–1999, and fit the model using Simultaneous Dynamic Least Squares (Paelinck 1996b). The model is shown to fit the empirical data well. The – potential divergence – leads up to a formidable coordination task for public authorities responsible for regional policies, as they are supposed – if their aim is absolute convergence in an economic sense, meaning equalizing incomes per head – to produce at any time a consistent set of regional policies for all the regions concerned, and not only for the less developed ones.