Regional inequalities and spatial economic interdependence: learning from the Greek prefectures

Abstract

Interregional trade constitutes a major factor of creating spatial economic interdependence. Both within and outside the national borders, spatial economic interdependence can be extremely strong. The interregional trade fl ows can infl uence decisively the economic development of each region. They can also formulate the size of the regional multipliers. In this article, the characteristics of spatial economic interdependence among the 51 Greek administrative prefectures are analyzed and evaluated by using the estimations of the regional multipli- ers. In particular, an interpretation of the interregional inequalities by connecting the interregional multipliers is attempted with certain economic as well as other characteristics of the prefectures of the country. In the last few decades, the varying levels of development observed among the Greek administrative regions and prefectures have certain repercussions on the prosperity of the local communities and on the development of the country as a whole. Therefore, these inequalities constitute a fundamental consideration of the currently applied economic policy. Investigating the magnitude and course of regional inequalities as well as the driving forces that induce unequal development patterns is of great importance in the confi guration of an effective regional policy. State intervention towards reducing regional inequalities is considered to be a necessity as long as both the current economic trends and a great deal of empirical evidence reveals the inherent weakness of the market mecha- nisms for mitigating regional inequalities. Investigating economic issues on a sub-national level (i.e., regional of prefectural level in the termi- nology of the present study) requires a different approach in relation to analyzing the same issues on a national level. This is justifi ed, at least, due to the high degree of economic interdependence between the regions or prefectures of a country (as this interdependence is mainly depicted, by the interregional trade fl ows) in comparison to the degree of economic interdependence between countries. A suitable context for analysis regional differences and interdependencies and for confi guring a coherent regional policy can be the use of regional multipliers. The regional multipliers provide a relatively accurate indication of the real size of a regional economy and can contribute to the analysis of the infl uences to the size of regional economy coming from strategic policy schemes such as public and private invest- ments, structural funds and fi nancial support to regional economic activities. In two previous studies (1, 2), a multiregional input-output model (MRIO) was constructed and the regional multipliers for unit vector of fi nal demand, consumption vector and investment vector were esti- mated, on a prefectural level for the 51 Greek prefectures. This was done by using the existing statistical information from National Statistical Service of Greece (NSSG). Subsequently, the regional multipli- ers were used for simulating the distribution of an extensive investment scheme aimed at achieving convergence of the different levels of development found among the Greek prefectures. In the present article, a further analysis of the regional multipliers' results is pursuit, in order to illustrate some of the critical characteristics of spatial interdependences among the prefectural economies of the country.