Papers in regional science vol:74 issue:2 pages:125-142
This paper analyzes the effects of European Monetary Union (EMU) on regional convergence. First, information is provided about the magnitude and the evolution of regional disparities. Subsequently, the relation between economic integration and long-run regional convergence is discussed. Third, regional convergence is shown to be dependent on flexible regional adjustment to changing economic conditions. In the transition to and in the final stage of EMU, sufficient regional wage flexibility will be required to cope with adverse economic shocks. The last part of the paper estimates the response of regional labor income to region-specific and national shocks.