Kaldorian Approach to the Economic Growth of Greek Regions

The present paper reports an attempt to examine the tendencies of regional growth and convergence with respect to Greek regions. It does so by establishing the validity of Kaldor's second Law of growth (or Verdoorn's Law) and tests for regional convergence in the 'conventional' framework introduced by Barro and Sala-i-Martin. The empirical results suggest that regions of Greece converge at an extremely slow rate. This slow rate can be attributed to differences in regional specialisation. Moreover, is established that both the manufacturing and the service sector are subject to increasing returns. Therefore, the service sector should not be considered as a 'passive' sector, but rather as one of the 'leading' sectors of the Greek economy.