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VALENCIAN INSTITUTE OF ECONOMIC RESEARCH

EC series Working Papers

WP-EC 2014-05

Why did Spanish regions not converge before the Civil War? Agglomeration and (regional) growth revisited: Spain, 1870-1930

Alfonso Díez Minguela, Julio Martínez Galarraga and Daniel A. Tirado Fabregat

Abstract

In this paper we explore the relationship between the spatial agglomeration of economic activity and regional economic growth in Spain during the period 1870-1930. The study allows us to revisit the existence of a trade-off between economic growth and territorial cohesion and also to examine whether the agglomeration of production was a key element to explain the upswing in regional income inequality in Spain during the country’s early stages of development. In doing this, we present alternative indicators for agglomeration and estimate conditional growth regressions at province (NUTS3) level. The results show the existence of a positive, robust relationship between the initial levels of regional agglomeration (mainly in the industrial sector) and subsequent growth trajectories. In line with new economic geography (NEG) models, we suggest that the presence of agglomeration economies in a context of market integration favoured the emergence of a cumulative causation process that widened regional inequality in the second half of the 19th century and hindered its reduction during the early decades of the 20th.

Keywords: agglomeration, economic growth, economic history, Spain.

JEL classification: N13, N93, O10, O40, R10.

 

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