Inequalities in income and education and regional economic growth in western Europe

Does inequality matter for regional growth? This paper addresses this question, using regionally aggregated microeconomic data for more than 100,000 individuals over a period of 6 years. The aim is to examine the relationship between income and educational distribution and regional economic growth in western Europe. Our results indicate that, given existing levels of inequality, an increase in a region’s income and educational inequality has a significant positive association with subsequent economic growth. Educational achievement is positively correlated with economic growth, but the impact of initial income levels is unclear. Finally, the results suggest that inequalities in educational attainment levels matter more for economic performance than average educational attainment. The above findings are not only robust to the definition of income distribution, but also across inequality measurements.