Recent changes in cross-regional convergence patterns

Abstract

Rationale Economic convergence measured by income per capita refers to the process whereby lower income regions post higher growth, so that over time cross-regional differences diminish. This process was quite intense in Spain from 1980 to 2008 when, coinciding with the onset of the financial crisis, it came to a halt. Accordingly, it is of interest to document this phenomenon and investigate its possible causes. Takeaways •Economic convergence between the Spanish regions was intense from 1980 to 2008, when it came to a halt following the outbreak of the financial crisis. •Labour productivity, largely driven by capital accumulation, was the main determinant of the convergence process between 1980 and 2008. It is also the main contributor to its subsequent stagnation. •However, in the most recent period, population ageing, which is especially pronounced in regions with higher income per capita, has helped to narrow the differences, albeit not sufficiently to offset the impact of the other factors.