The Economic Development of Europe's Regions

A Quantitative History since 1900

Joan Ramón Rosés, Nikolaus Wolf, Joan Ramón Rosés, Nikolaus Wolf

• Publisher: Routledge
• Year: 2018
• ISBN:
  9780429831713
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book is the first quantitative description of Europe's economic development at a regional level over the entire twentieth century. Based on a new and comprehensive set of data, it brings together a group of leading economic historians in order to describe and analyze the development of European regions, both for nation states and for Europe as a whole. This provides a new transnational perspective on Europe's quantitative development, offering for the first time a systematic long-run analysis of national policies independent from the use of national statistical units. The new transnational dimension of data allows for the analysis of national policies in a more thorough way than ever before.

The book provides a comprehensive database at the level of modern NUTS 2 regions for the period 1900–2010 in 10-year intervals, and a panoramic view of economic development both below and above the national level. It will be of great interest to economic historians, economic geographers, development economists and those with an interest in economic growth.

1    Introduction

Joan Ramón Rosés and Nikolaus Wolf

Where is Europe heading? The project of European integration has hardly ever been so strongly contested since its beginnings in the 1950s. Faced with several political, social and economic challenges on a global scale, some argue for a return of Europe’s nation states, while others hope instead for a United States of Europe. But neither a European superstate nor a retreat back to the national level are likely be a good fit for the enormous diversity of Europe faced with the vagaries of globalization. This book is an attempt to describe the economic development of Europe from the perspective of regions in the long run, before the First World War until today. It is the first quantitative description that aims at a comparison of European regions over time, in the cross section and to other parts of the world. This was possible only due to the collaboration of many researchers from all parts of Europe, who contributed their specific knowledge towards a new synthesis.

At the heart of it is a new data set on economic performance in terms of GDP per capita in the boundaries of modern NUTS 2 regions for the period 1900–2010 (which are also the focus of the regular ‘cohesion reports’ of the EU). While we are aware of the dangers of using modern definitions of regions and focusing on GDP, we see this as an exercise in benchmarking. To understand how national and supranational institutions have affected the European economy in the long run, we need to capture its variation at the regional level in a consistent way. Our approach is a first step in this direction, and we hope that many follow. To this end, the data on regional GDP are made available both in an appendix to this book (see pp. 387–430) and online (see www.ehes.org/resources.html).

A regional perspective on Europe shows, as if by definition, great diversity. Within a general trend of quite dramatic improvement in the standard of living over the last generations, there are regions that forged ahead, some that kept their position compared to others and finally some that experienced a large decline in relative terms. We find that similar to the dynamics of personal income and wealth distributions, the regions of Europe experienced convergence, that is a decline in regional income inequality. This continued until the 1970s, when it came to a halt and started to reverse thereafter. The many efforts to counter such developments with structural funds and other regional policies since the mid-1970s had an effect, but were clearly insufficient to stop this reversal. We address some of these questions in our country chapters and in a general survey. Finally, we add a chapter on the regional development in the US to our book. In a long tradition of comparative history, we hope that this helps to see more clearly where Europe is different, and how both national and European institutions shaped the economy in the past and can do so in the future.

2 Regional economic development in Europe, 1900–2010

A description of the patterns

Joan Ramón Rosés and Nikolaus Wolf

1. Introduction

Over the last four generations, the European economy has gone through turbulent changes. In 1900, the UK was still the leading country of the world in more than one respect, with France, Germany and others following and catching up. The First World War marked the end of a long period of both economic growth and integration. Moreover, if seen from a global perspective, the Great War also marked the end of European dominance and the beginning of a decline of the continent in weight and influence. During the interwar years, the European growth record was rather poor since erroneous policies and coordination failures prevented Europe from fully realizing its economic potential (Rosés and Wolf 2010). After the Second World War, Europe’s economy started another long period of rapid economic expansion (the ‘Golden Era’), which slowed down in the 1970s but nevertheless continued until today. Again, this expansion was accompanied by a process of integration across states, notably with the formation of the European Economic Community and later the Eurozone. More recently, the project of European integration has been fundamentally questioned, partly in consequence of the global financial crisis and the European debt crisis that followed in its wake. Moreover, it seems that forces of economic and political disintegration are gaining momentum not only in Europe, but also in other major developed economies. These different historical tendencies have been described and analysed by a substantial literature elsewhere (see, for example, Crafts and Toniolo 1996; Eichengreen 2007; Berend 2016; James 2017).

However, most authors have treated the European economy as a group of national economies, stressing the role of national governments and international organizations. Such an approach has several advantages. First, it naturally ties in with the political history of Europe, based on the emergence of territorial national states during the early modern period and their international relations. Second, most quantitative evidence has been collected and described at the level of nation states based on the work of national statistical offices, which developed during the nineteenth century. Yet this approach comes at some costs. It neglects the often-considerable variation within states (sometimes larger than between states) and it tends to attribute differences in development to differences in national institutions or policies without being able to test this. As we will show in this chapter, there are several clusters of regions, which are sometimes highly developed, that transcend national boundaries, such as the enlarged Rhine–Meuse–Scheldt delta. Furthermore, differences of income per capita (and labour productivity) within countries are larger, and sometimes more resilient, than differences across countries. In particular, the process of income convergence across European nations was not always accompanied by a similar process of convergence of regions within countries. We can show that the distribution of activity across regions shifted over time, first until 1980 converging to a more equal distribution, and from 1980 diverging back to a less equal distribution.

In this book, we want to reconsider the economic development of Europe since 1900 from the perspective of European regions, as pioneered by Pollard (1981), and to provide a quantitative basis for more work along these lines. We do this using modern regional units (following the European NUTS classification as far as we can), which we trace back over time with comparable indicators of economic development. We provide a set of new estimates of regional employment structures and regional GDP and GDP per capita in 1990 international dollars, stretching over more than 100 years. These data allow us to compare regions over time, among each other and to other parts of the world. After some brief notes on our methodology, we describe the basic patterns in the data in terms of some key dimensions: variation in the density of population and economic activity, the spread of industry and services and the declining role of agriculture, and changes in the levels of GDP and GDP per capita. We next discuss patterns of convergence and divergence over time, and show how the geography of activity has changed with a long-run decrease in spatial coherence from 1900 to 2010 and a U-shaped development in geographic concentration and regional income inequality. The latter seems to be related to the finding of a U-shaped pattern of personal income inequality, as documented by Piketty and Saez (2003), Piketty (2014) and others.

2. Data and methodology

Our data set contains 173 regions covering 16 European nation states at the level of NUTS 2 (as of 2014) and spans 11 benchmark years between 1900 and 2010.¹ We could not at this stage include the long-run development of states in Central and Eastern Europe because the reconstruction of historical data that would stretch back until 1900 is still under way. Eight of our 173 sample regions are aggregated from two or three NUTS 2 regions in order to trace the regions over time in constant borders. Moreover, some of our regions have belonged to different political entities over time, such as Alsace or Lorraine, which provides us with some interesting case studies on the potential role of national institutions for economic development. One of our regions – Flevoland in the Netherlands – consists mostly of land that has been reclaimed from ocean beds only in the 1950s and 1960s, and therefore enters the data only in 1970. Lastly, for two states, Luxembourg and the Republic of Ireland, we have no further regional breakdown.

To reconstruct regional GDPs, we have resorted to two different types of methods and sources. After 1960, our book has mostly employed official data on the regional distribution of income. Specifically, from 1960 to 1990, national statistic offices provided that kind of information (see each chapter for detailed information on this), and since then regional data are being provided by Eurostat, the statistical office of the EU. For the majority of countries before 1960, authors have employed Geary and Stark’s methodology (Geary and Stark 2002). Notable exceptions here are Austria and the Netherlands, where a more direct approach was used, as described in these chapters. Geary and Stark’s methodology has two main advantages: (1) it requires readily available data (employment by sector and region, wages by sector and region, and historical national accounts); and (2) it has an easy interpretation within the national accounting framework. The basic principle is that a country’s GDP is equal to the sum of all regional GDPs. More specifically, the total GDP of any country (Y_i) is the sum of n regional GDPs (Y_j):

$$Y_i={\displaystyle \sum }_j^n{Y}_j$$

Furthermore, regional GDP (Y_j) can be decomposed into the contributions from all sectors in the economy:

$$Y_j={\displaystyle \sum }_k^K{y}_{jk}{L}_{jk}$$

y_jk being the output, or the average added value, per worker in each region j, in sector k, and L_jk the number of workers in each region j and sector k. As we have no direct data for y_jk, its value is approximated b...

Table of contents

• Cover Page
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• List of Maps
• Notes on Contributors
• 1 Introduction
• 2 Regional Economic Development in Europe, 1900–2010: A Description of the Patterns
• 3.1 From Empire to Republic: Regional Inequality in Austria, 1870–2014
• 3.2 Changing Spatial Inequality in a Divided Country: Belgium, 1896–2010
• 3.3 Regional GDP in Denmark, 1850–2010
• 3.4 Balancing East and West: Evidence from Finland’s Regional GDPs, 1880–2010
• 3.5 A Long-Run Perspective on French Regional Income Inequality, 1860–2010
• 3.6 Regional Economic Growth in Germany, 1895–2010
• 3.7 Regional Income Inequality in Italy in the Long Run (1871–2010): Patterns and Determinants
• 3.8 The Comparative Development of Regions in the Netherlands, 1820–2010
• 3.9 Regional Income in Norway, 1900–2010
• 3.10 The Evolution of Regional Income Inequality in Portugal, 1890–2010
• 3.11 The Evolution of Regional Income Inequality in Spain, 1860–2010
• 3.12 Regional Convergence and Divergence in Sweden, 1860–2010: Evidence from Swedish Historical Regional GDP Data
• 3.13 Switzerland
• 3.14 150 Years of Regional GDP: United Kingdom and Ireland
• 4 Regional Inequality in the United States: Long-Term Patterns, 1880–2010
• Data Appendix
• Index