Social capital and income convergence in European regions

Abstract

This chapter has two main objectives. First, we analyze per capita income convergence for a large sample of European regions (235) at the NUTS2 level during the pre-crisis period (1995–2008). Despite convergence analysis having attracted considerable debate, as well as yielding a large amount of research output, several issues such as the impact of the economic crisis, or the European Union enlargements, have contributed to revive the issue. Second, we exploit some virtues of the distribution dynamics approach to convergence analysis in order to control for how several dimensions of social capital, including trust, associational activity and social norms, might have shaped the per capita income converging (or diverging) patterns among European regions. Given the variety of objectives, results can be explored in several dimensions. Regarding the unconditioned convergence analysis, we find a relatively persistent bimodality in per capita income, suggesting that regional income in Europe is becoming polarized between the rich and the poor, the latter corresponding mostly to Eastern and Central European countries. These divergences are partly explained away when social capital enters the analysis – especially in terms of trust and active participation. However, this effect is stronger for middle-income regions, whereas for both the richest and poorest regions the impact of social capital is weaker.