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© 2022 International Monetary Fund
WP/22/198
IMF Working Paper
European Department
Regional Disparities in Europe
Prepared by Ravi Balakrishnan, Christian Ebeke, Melih Firat, Davide Malacrino, and Louise Rabier
Authorized for distribution by Ravi Balakrishnan
September 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: While the level of disparities across regions in 10 advanced European economies studied in this paper mostly reflects productivity gaps, the increase since the Great Recession has resulted from diverging unemployment rates. Following the pandemic, this could be further exacerbated given teleworkability rates are lower in poorer regions than in high-income regions, making them ex-ante more vulnerable to the pandemic’s likely material impact on the prevalence of remote work. Preliminary evidence from 2020 confirms that regional disparities between countries increased during 2020. A further concern is that the pandemic might accelerate the automation of jobs across Europe, something which often happens following recessions. While lagging regions have lower ex-ante vulnerabilities against the routinization, the transformation of jobs through sectors with higher routinization rates in these regions could increase their vulnerability to technological change over time. The green transition could also lead to challenges for regions that have benefitted from carbon-intensive growth strategies. Finally, the paper discusses the role for policies—including placed-based ones—in reducing disparities in the face of the aforementioned short, medium, and long-term risks.
RECOMMENDED CITATION: Balakrishnan, Ravi, Christian Ebeke, Melih Firat, Davide Malacrino, and Louise Rabier, 2022, “Regional Disparities in Europe.” IMF Working Paper WP/22/198.
| JEL Classification Numbers: | R12, J2, J24, O44 |
| Keywords: | Regional inequality; teleworkability; automation; climate change |
| Author’s E-Mail Address: | RBalakrishnan@imf.org; CEbeke@imf.org; MFirat@imf.org; DMalacrino@imf.org; LRabier@imf.org |
| JEL Classification Numbers: | R12, J2, J24, O44 |
| Keywords: | Regional inequality; teleworkability; automation; climate change |
| Author’s E-Mail Address: | RBalakrishnan@imf.org; CEbeke@imf.org; MFirat@imf.org; DMalacrino@imf.org; LRabier@imf.org |
Title Page
WORKING PAPERS
Regional Disparities in Europe
Prepared Ravi Balakrishnan, Christian Ebeke, Melih Firat, Davide Malacrino, and Louise Rabier1
Contents
Introduction
Data and Measurement of Disparities
Anatomy of Regional Disparities
The Evolution of Disparities Since the Early 2000s
Components of the GDP per Capita
Productivity
Labor Markets
Beta-convergence
Potential Impact of the COVID-19 Pandemic on Existing Disparities
A Snapshot from High-frequency Data: Mobility Index
Customer Interaction Intensity
Short-term Risks: Teleworkability
Longer-term Risks: Automation
Disparities and the Green Transition
Policy Discussions
Is There a Role for Place-based Policies?
Smoothing the Effects of the Green Transition Across Different Regions
Conclusions
References
Appendix A. Figures and Tables
Appendix B. Disparities in Net Disposable Income
Appendix C. The Green/Growth Tradeoff: A Case Study of Two German Regions
The authors would like to thank Andy Jobst, Myrto Oikonomou, and Laura Papi for their helpful comments as well as participants in seminars at the European Commission, the ESM, and the IMF. They also thank Estefania Cohn Bech, Shiqing Hua, and Christine Rubio for excellent research and document production assistance.