Related versus unrelated variety and per employee income regional disparities: A case of Polish regions

Abstract

The main goal of this paper is to empirically examine the effects of related and unrelated variety on per employee income in Polish NUTS 2 regions, and the resulting income inequality. The study is based on regional panel data for the 2003–2018 period using the GMM estimator system. The positive effect of related variety on per employee income and the negative effect of unrelated variety on per employee income are reported. Our simulation results show that regional income inequality could be reduced by promoting related variety in eastern regions of the country.

Keywords

• related variety
• unrelated variety
• knowledge spillovers
• per employee income
• externalities