Multidimensional Analysis of Regional Inequality: The case of Hungary

Abstract

Hungary has been in a transition process since the fall of the IronCurtain. This process has resulted in important developments in regionalpolicy. The introduction of a western style policy system seems,however, not to have affected regional inequality to any noticeableextent as measured by income per captia. There are still largedisparities between the richest counties and the remaining counties interms of this indicator. However, single indicator approaches toregional inequality have been criticised. Therefore in this paper weadopt a multidimensional approach to analyse regional inequality. Forthe counties of Hungary the multidimensionality of inequality is takeninto account by using a multiple of social and economic indicators thatare combined into a composite index. Theil's second measure ofmultidimensional inequality and principal component analysis are used toconstruct the composite index. The results thus obtained are used toidentify the least-favoured and the most-favoured regions. We find thatthere are substantial differences between the single indicator approachbased on per capita income and the multidimensional approach. Moreover,we argue that the EU Phare Programmes for Hungary have helped theeconomic development in developed regions situated on the EU border butat the same time have stimulated disparities within Hungary.