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Final Activity and Management Report Summary - EUMICRO (The Microeconomics of Growth across Regions in Europe)

One of the core components of the European cohesion policy has been to reduce the disparities between income levels of different regions and the backwardness of the least favoured regions; this objective has, in general, been manifest as the promotion of convergence between EU regions through policies which attenuate the structural differences across regions. One measure of the extent of convergence is captured by the number of regions that share a common trend and form a convergence club, namely a group of regions which although each possessing different steady states, demonstrate a tendency to cluster relative to other groups. In this context is evident that the correct identification of the extent of convergence within a regional economy is paramount given that policy usually tries to achieve regional convergence by reducing the gap between the richest and the poorest regions.

The EUMICRO project has pursued this notion using a novel procedure for identifying regional 'convergence clusters' that can correct potential problems generated by the short time horizon of the data used. In operationaliSing a bootstrap test of multivariate stationarity our results confirm the oversized property of the asymptotic test and reveal a significantly greater degree of convergence across regions within the European Union for a number of industrial sectors. To further assess the driving forces behind the convergence clusters across the four sectors, our observed clusters were then compared with a number of hypothesized regional groupings based on different theories and models of regional growth and development. We provide estimates of the correlations between our observed outcomes and these cluster patterns.

For all three types of clustering hypotheses -- on the basis of location and socio-demographic factors, and policy status -- there is a tendency for the correlation between the cluster types suggested by new economic geography and our observed clusters to increase from the asymptotic to the bootstrap test. The aim of the EUMICRO project was also to understand which factors, beyond income and material conditions, play a significant role in determining individual well-being and whether the attributes of those closest to us regionally affect us more than national trends and beliefs.

The question the project has addressed is how individuals' relative social position and geographic location influences individual well-being at different levels of aggregation. The project has also explored the extent of inter-personal comparability in survey data which is manifest in the presence of individual-specific response scales. We consider this problem in the context of existing evidence on cross-country differences in subjective life satisfaction, and in particular the extent of cross-country and inter-personal comparability.

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United Kingdom
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