Regional capability and regional disparity: a conceptual framework and applications within Korea

Abstract

Mainstream economic theories provide sophisticated frameworks for a better understanding of issues surrounding regional growth and disparity. However, they lack important practical as well as theoretical points. Most importantly, the performance of a regional economy is discussed only in monetary terms such as per capita income or gross regional domestic product, with little attention paid to the life satisfaction of residents in the region. This study investigates an alternative approach for a better understanding of regional disparity. In particular, this study presents a new analytic framework based on the capability approach by Sen. The proposed capability-based analysis of regional disparity emphasizes five aspects of life that may influence residents’ ability to pursue what they want to do or to be. In addition, the results of the proposed simple regression analysis indicate that the marginal effect of income on life satisfaction may be augmented according to the levels of regional capabilities. In this regards, a conventional approach based on income and wealth alone in regional disparity research and policy may overlook important mediating roles of regional capabilities.