Economic cohesion and development of the European Union's regions and member states - A methodological proposal to measure and identify the degree of regional economic cohesion

Abstract

The EU cohesion policy seeks to mitigate imbalances between countries and regions and enhance greater economic development of the whole Union. However, notwithstanding its efforts and certain progress on this issue, territorial disparities still represent an open challenge for the European Union, which requires improving the cohesion policy, particularly regarding its measurement, in order to allocate resources more efficiently.This article aims to propose an innovative methodology to measure and identify the degree of cohesion of both EU NUTS-2 regions and member states in economic terms. To this end we first selected the main indicators which would better explain GDP per capita growth by applying factor analysis; and second, we measure the degree of cohesion as the relationship between economic development and its potential attributable to the inequalities detected in the selected set of indicators. To ensure the robustness of this research, we compared the results obtained by applying the Gini, Atkinson, and Theil indexes. Finally, the Economic Cohesion Index (ECI) has been elaborated in order to identify regions that, regardless of their economic development, still present a very low level of cohesion within the group in which it is compared.The main findings indicate that the 27 EU countries are quite cohesive. On the contrary, from the regional perspective, the study shows important imbalances between economic development and its potential that mainly affect the regions of Greece, Spain, and Italy, where Greece is the leading country among less developed regions and Spain and Italy among more developed.