Economic Convergence vs. Socio-economic Convergence in Space

This paper aims to present a new analysis framework for assessing disparities among regions (or countries). It combines both economic and social variables, where the economic attributes refer in particular to marked differences in consumption variables. This analysis is also appealing for spatial convergence analyses over time. In our paper, both economic and social variables are included as the basis of a logical operational scheme that is suitable for comparative research. In this scheme the economic aspects of living standards are represented by different categories of consumption expenditures, while the social aspects are represented by indicators of health, education, labour market conditions, etc. The analysis of a region’s performance cannot be limited exclusively to either economic or social aspects, and hence our study aims to combine in an integrated framework both material (i.e., economic) and immaterial (i.e., social) aspects of society. In a time perspective, by introducing these concepts in the analysis of differences among regions, we may then be able to distinguish the concept of convergence into economic convergence and social convergence. Our analysis is illustrated by means of an empirical application to Italian data. 1 WELFARE DISPARITIES: INTRODUCTION Since the days of Adam Smith, when the wealth of nations was explicitly addressed as a central policy and research issue, economists have been puzzled by the emergence and persistence of welfare disparities among nations or regions. This phenomenon has led to a continuous flow of both theoretical and applied studies that aim to investigate the causes and consequences of differences in welfare positions at national and regional levels. Many empirical contributions were based on extensive statistical data bases that were suitable for cross-country comparisons. Most commonly, many international comparisons of the economic performance of countries used to assess the level of development (or growth therein) in terms of gross domestic product (GDP). Differences in growth and development gaps among countries have traditionally been investigated and measured in terms of income levels per capita. And this has led to extensive international statistics on welfare differences. It is noteworthy that this approach has also been strongly criticized. The most frequent criticism is based on the observation that the standard GDP index is not able to catch the different – sometimes mutually contrasting – dimensions of welfare; GDP is at best only a partial measure (or proxy) of a multi-dimensional concept of well-being (see Sen, 1985, 1987; Khan, 1991; and Dasgupta, 1990). For example, many externalities are not included in GDP (e.g., environmental decay), so that GDP is a biased measure for welfare comparisons. In the last years, a new strand of literature has developed with specific attention for additional aspects of growth, convergence and social well-being. An original and stimulating study was offered in an article by Hobijn and Franses (2001). They drew the attention of economists to the need to extend the evaluation of a country’s performance towards measures of living standards. They argued that convergence in income levels has an important similarity to the study of convergence in living standards (Hobijn and Franses, 2001, p.172). They re-addressed the convergence issue that has been so prominent in the economic growth literature and presented evidence that convergence in GDP does not necessarily imply convergence in living standards, the latter being defined by daily calorie supply, protein calorie supply, infant mortality, and life expectancy at birth. We will concisely present here a few recent studies on this topic, for the sake of illustration. Neumayer (2003) has presented an interesting analysis of convergence in living standards that offers results that are in sharp contrast with the conclusions by Hobijn and Franses. He demonstrated that, in contrast to real GDP per capita, there is clear convergence in the basic attributes of living standards, when these are measured by life expectancy, infant survival, educational enrolment, literacy, and telephone and television availability or access.