ABSTRACT

The First World War marked the end of a long period of both economic growth and integration. Industry localization is markedly clustered in Germany, eastern France and northern Italy. The localization of services in turn was for a long time dominated by capital regions. The institutional framework of the various nation states had a strong effect, especially until 1950. The literature on economic growth distinguishes between factors that shape the short- to medium-run adjustment to a steady state level of growth and factors that shape economic growth in the medium to long run. Regions with a high share of employment in agriculture in time tend to grow systematically less, and having above-average soil quality tends to be harmful. An explanation for this could be specialization along differences in endowments. Regional inequality declined from 1900 but started to increase again around 1980, very much at the same moment when personal income inequality started its dramatic rise.