Two Speed Regional Convergence In Portugal And the Importance of Structural Funds on Growth

The aim of this paper is twofold: in first place we want to ascertain if there is any difference in the convergence process between the 'Littoral' (coastal) and the 'Interior' (inland) areas in Portugal in terms of per capita income. In second place, we examine the relevance of Structural Funds (European Regional Development Funds) as conditioning factors influencing the convergence process in Portugal and to what extent these funds contributed to the growth of regional per capita income. In doing so, we apply a panel data approach to the convergence in per capita income among the 30 NUTS III regions in Portugal, and a separate analysis is given for the regions constituting the 'Littoral' and 'Interior' zones. The evidence shows that the distinction between the 'Littoral' and 'Interior' areas is important in the convergence process in Portugal, pronouncing two differeent convergence patterns. Structural funds help regions to grow faster but their marginal impact is small. Structural funds have a significant positive effect only in the 'Littoral' area helping these regions to grow faster. There is some evidence that the 'Littoral' area spreads out some spill-over effects on the whole regional growth in Portugal.