The evolution of real disparities in Portugal among the nuts iii regions. An empirical analysis based on the convergence approach

Abstract

The aim of this paper is to explain regional convergence in Portugal, at Nuts III level, in terms of per capita income and productivity. We employ an alternative estimation approach based on panel data that allows for individual differences across regions. The concepts of absolute and conditional convergence are tested, as well as, the importance of some conditioning structural factors related to resource allocation and demand conditions. Our evidence shows that convergence among the 30 regions in Portugal is rather conditional than absolute. Labour shares in the main economic sectors are important in explaining convergence in per capita income and productivity. Output growth, reflecting demand conditions and labour composition by sectors are shown to be relevant conditioning factors in explaining the convergence process in productivity. Our evidence shows a more significant shift of labour from the primary to the tertiary sector and when this element is introduced into the convergence equations, convergence is shown to be higher