Testing Models, Describing Reality or Neither? Convergence and Divergence of Regional Growth Rates in Europe during the 1980s

There has recently been increasing interest in regional economics. Indeed Blanchard (1991) goes so far as to claim that “macroeconomists have rediscovered regional economics”. Krugman has coined the phrase “the new economic geography” (Krugman, 1991). One recent manifestation of this interest has been the lively debate about ‘convergence’ and ‘divergence’ in growth rates (Baumol, 1986; Barro, 1991; Barro and Sala-i-Martin, 1991; Barro and Sala-i-Martin, 1992; Salai-Martin, 1994). To regional economists this is not a new debate. It can be traced back at least to Borts and Stein (1964) and the debate between the followers of Myrdal (1957) and Kaldor (1970) and the neo-classical school. This debate was summarised by Richardson (1973), and more recently by McCombie (1989a and b), and has formed a staple of most regional economics courses ever since (see, for example, Armstrong and Taylor, 1993).