THE INCOME INTER-REGIONAL REDISTRIBUTION AND THE INCOME SPATIAL STABILIZATION EFFECTS: AN APPLICATION TO PORTUGAL

Pedro N. Ramos,
Faculdade de Economia da Universidade de Coimbra (Portugal)

Carla Coimbra,
Instituto Nacional de Estatistica (Portugal)

Abstract:

The main idea of this paper is that although the per capita regional GDP is a good indicator of regional income according to its place of generation, it cannot take into account the redistribution process that comes after production, and that may be very significant at the regional level. The paper focuses then on the transformation of the regional product on the adjusted disposable income of the households, and on the different redistributive flows that proceed with that transformation. It has two distinct parts. Firstly we adopted a synchronic analysis where we deal with the so-called income inter-regional redistribution process. In this part we wonder how the regional income inequalities, that are the outcome of the different locations of production, are smoothed when the income falls into the hands of the households (or if the contrary happens, how they are amplified). The identification and the estimation of the weights of the different channels through which that lessening (or amplifying) process acts is an essential part of the work. In a second part ahead we turn to a dynamic approach where we focus on the spatial stabilization of the income effect. At this point our purpose is rather to look at the shocks on the regional product, and to discuss how they can be absorbed (or not) when the production income is transmuted into the regional adjusted disposable income of the households. The degree and the channels of risk sharing (as this absorption process is named too) are also estimated.

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Key Words: Inter-regional redistribution; spatial stabilization; risk sharing; cross-sectional variance

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