Long-run economic growth paths in the Hungarian counties

The overall process of economic growth and its spatial inequalities is permanently at the forefront of research in regional science. Based on spatial statistical information, this study identifies the main trends observed in the new millennium and deduces long-term growth paths until 2060 for Hungary in a NUTS3-level spatial disaggregation. Economic growth is analysed in a decomposition, commonly used in the growth accounting literature, in which the effect of demographic, productivity and employment changes on growth performance is delineated for each NUTS3 region. For better comparability, it provides the results by five county types based on their specific growth dynamics and economic structure, established in previous publications. Based on these results, the second part of the study projects long-term, county-level growth paths for Hungarian counties in a top-down approach. The existing, national-level economic growth projection published by the European Commission will be spatially disaggregated among the NUTS3 regions. Our method is built on extrapolation the practice also used by the European Commission. This reflects path dependence; that is, the impact of past growth processes appears in long-term regional paths, but with gradually decreasing importance. The goal of this exercise is not to prepare exact forecasts, but to address "what, if ..." type questions. We aim to study what sub-national development paths and regional inequality scenarios can be expected, assuming that business-asusual follows in the long run, and the national economy converges to the European Union in average per capita GDP. Two possible spatial scenarios will be considered. One of them projects a decreasing pace of spatial differentiation and relies more on productivity growth, while the other presumes constantly increasing spatial differentials and stronger employment growth. The first scenario delivers more preferable and more reasonable results for the NUTS3 level growth prospects. The results point out that the spatial concentration of the economic activity is expected to proceed in the future in Hungary, but more slowly than it did between 2000 and 2018. Due to the unfavourable demographic prospects, including decreasing population and a growing share of inactive population, the primary source of long-term, sustainable economic catching-up will be increasing employment rates with limited effect, and the advance of labour productivity with a strong emphasis. Computations indicated that although a large part of the necessary employment growth has been achieved during the past decade in Hungary, a lot of efforts will be needed to increase the effciency and the competitiveness of the labour force in all regions. These results call for well-designed and targeted development policies in favour of human resource investments and strengthened institutional effciency.