A long-run perspective on Latvian regional gross domestic product inequality, 1925–2016

Abstract

This paper for the first time calculates the historical regional GDP (rGDP) for an Eastern European country by using the methodology of Frank Geary and Tom Stark [2002. Examining Ireland's post-famine economic growth performance. The Economic Journal, 112(482):919–935]. The estimates cover the period 1925–1935 and are made for the historical Latvian regions Kurzeme, Vidzeme, Zemgale, Latgale, and Riga as well as within the contemporary NUTS3 units. The results are compared with the GDP disparity of the NUTS3 regions of the restored independent Latvia (2001–2016). The main findings are that the sigma divergence remained stable. Direct comparisons of regional growth rates indicate that economically more advanced regions were more sensitive to business cycles than less advanced regions. Hence, sigma divergence seems to prevail in times of high growth and convergence in times of low growth.

Keywords

• Regional gross domestic product
• cross-regional economic inequality
• interwar Latvia
• restored independent Latvia
• sigma convergence
• beta convergence