Regional Income Disparities Grow With Recession

According to analyses by The Economist discussed in one of their recent articles, regional income gaps appear to be widening in several developed countries with the recession. While regional income gaps can be slightly distorted due to regional cost of living differences, the income gap between the wealthiest and the poorest regions of several nations are profound.

In a method commonly used by OECD to compare the level of regional disparities between different nations, the first graph compares the GDP per head as a percent of the national average between the wealthiest regions and the poorest regions for each country. As this graph indicates, Britain has the largest regional difference in GDP per head. The second graph indicates that, not only are these regional disparities present, but have actually increased over the last decade in the United States, Britain and France.

Many policies have already been put in place to abate regional income gaps in these countries. For example, the European Union's "structural funds" are designed to transfer income from wealthier regions to poorer ones. However, these transfer policies have been largely unsuccessful in most countries. According to this article, policy that focused more on increasing productivity through improved education and skills in these areas would be more successful in diminishing these regional income disparities. Some income disparities are natural, however, as rural areas are less productive than urban centers. Allowing greater labor flexibility so that workers could more easily move to areas with more jobs available could also be helpful.

Posted by Brittany