Urban Economic Growth in Europe: Testing Theory and Policy Prescriptions

Abstract

A quite robust model of differential growth rates of per capita income in the major functional urban regions of the European Union is presented and tested for the 1980s. The results underline the important role of purely spatial economic processes in differential regional growth and suggest that the pattern of European urbanisation tends itself to generate systematic divergence of mean per capita incomes between neighbouring city-regions, even though the mechanism generating this divergence of mean incomes is not inconsistent with converging incomes for comparable individuals. In addition, the evidence is supportive of a spatial adaptation of Romer's endogenous technical progress model. The model is formulated in a way which tests policy concerns. In general, the results are supportive of European regional policy although the systematic spatial effects of European integration seem to be fading and extending outwards to near-peripheral urban regions.