Measurement of Regional Economic Disparities

Regional disparities have become a hotly debated topic in the last two to three decades. The reason for this increasing interest in regional disparities is twofold: from an applied perspective it should be an issue of political priority in most supra-national integration schemes and it is undoubtedly so in the European Union (EU), as the persistence of important regional disparities is considered to be detrimental for the success of supra-national integration projects; from an academic perspective, the studies on regional disparities and, in particular, of regional convergence are an indirect way of testing the validity of different and competing theories of economic growth and international trade. There is considerable debate over which technique is the most suitable to measure regional disparities. The main problem in this debate is that the term disparity is a multifaceted concept encompassing dimensions such as convergence, inequality and polarisation. Thus, the way of measuring regional disparities is closely linked to the dimension at stake, that is to say, to the research needs. The point is that there are so many disparity indicators that, even when analysing a specific dimension, it is not an easy task to choose among them. This being the case, the best practice usually involves the use of different indicators to measure the same dimension; if all indicators point to the same direction we can be fairly sure that the results are robust. This is indeed the approach used in this paper. Its main objective is to offer a review of the different ways of looking at regional disparities and, above all, of how to measure them. In doing so, the paper also pays attention to the data requirements and sources needed to compute different types of disparity indicators, and to their main characteristics.