Regional Inequality and Spatial Dependence in Sweden

Sammanfattning: Regional inequality is a growing concern in developed countries, as country-level convergence may obscure increasing disparities within countries. This thesis aims to address this concern by examining the dynamics of regional convergence in Sweden from 1980-2022. The study employs spatial data analysis and econometric methods to examine the spatial dynamics of income and spillover effects between regions, providing a comprehensive and up-to-date understanding of regional inequality in Sweden. The analysis of per-worker income growth among Swedish regions reveals a nuanced picture of β- and σ- convergence. Overall, the findings indicate β- convergence throughout the period, with notable convergence occurring between 1980-1994. However, between 1995-2008 convergence slowed, and from 2009-2022, a diverging pattern emerged. Examining σ-convergence confirms an overall decrease in the dispersion of regional income and an increase in dispersion in later decades. Moreover, the divergence since the beginning of the 2000s seems to be primarily driven by within-regional inequality. The application of spatial econometric methods uncover significant spillovers during the first two periods, indicating that regional growth was positively influenced by the economic performance of neighboring regions. Furthermore, exploratory spatial data analysis reveals that regional incomes have been influenced by spatial dependence and clustering, although to a limited degree and primarily during the 1990s and 2000s. Overall, spatial clustering does not seem to be associated with increasing regional dispersion of income.