Does distance matter for determining regional income in the European Union? An approach through the market potential concept

Abstract

This paper focuses on the relationship between market potential and income for the European Union (EU) regions over the period 1982–1999. It is proved that closeness to large consumer markets or in other words, market potential, is an important explanatory variable for regional income in the early 1980s, but it has decreased its significance in determining EU regions income in the 1990s. Thus dynamic income regions have also emerged in the EU periphery, and need not necessarily be close to rich regions.

Acknowledgements

This paper has partially been finished while the first author was a Research Scholar at the Department of Economics at the London School of Economics, UK. The author thanks Andrés Rodríguez-Pose, Stephen Redding, Tony Venables and Holger Breinlich for helpful comments to previous drafts of this paper. They are grateful to seminar participants at European Urban and Regional Studies Conference (Finland, 2003), Regional Studies Conference (Italy, 2003) International Conference on Policy Modelling (Istanbul, 2003), Asociacion Española de Ciencia Regional (Santander, 2003 and Applied Business Research Conference (Puerto Rico, 2004). The usual disclaimer applies.