Does income polarization affect economic growth? The case of the European regions

Abstract

This article examines the relationship between income polarization and economic growth in the regions of the European Union over the period 1993-2003. The results indicate that the level of income polarization is negatively associated with regional growth. This finding is in fact robust to various alternative specifications including a number of additional explanatory variables, such as initial per capita GDP, industry mix, human capital stock, population density or market potential. Furthermore, it should be noted that the observed negative correlation between polarization and economic performance does not depend on the number of groups used to analyse the degree of income stratification within the sample regions.