Does Spatial Concentration Foster Economic Growth? Empirical Evidence on EU Regions

In this paper, we propose a descriptive analysis of the evolution of EU economic geography during the last twenty years and analyse the econometric relationship between spatial agglomeration and growth. Firstly, we find that during the 1990s, when the ongoing process of EU integration accelerated and the EU increased its public support (through Structural Funds and Cohesion Funds) in favour of backward regions, the concentration and polarisation of economic activity declined, especially in manufacturing sectors. Moreover, different econometric specifications produce robust evidence of a significant and positive effect of concentration and polarisation on growth in the case of manufacturing sectors. This funding yields us to cast some doubt on the traditional wisdom that regional policies should always foster a dispersion of industries