FUNCTIONAL ECONOMIES OR ADMINISTRATIVE UNITS IN GREECE: WHAT DIFFERENCE DOES IT MAKE FOR POLICY?

This paper considers the 2001 income mosaic of Greece at the local level. It constructs a model based on occupational, territorial, and demographic factors to isolate their impact on declared income and study clusters of income at the disaggregated territorial level. The new cluster-based spatial specification provides a better econometric fit compared to the specification based on the existing official regional framework. This suggests that the economy does not operate according to the country's administrative divisions, but rather according to local-specific factors and transportation linkages, as is the case in a fragmented land united by its transportation network. Accordingly, if income disparities are larger within rather than between administrative regions, regional economic development policy might best be conducted within a functional-area framework rather than the current administrative-region framework. These findings entail important policy implications for EU regional development and resource allocation, and are also useful in additional tentative policy proposals.