LIS Newsletter, Issue No. 1 (March 2017) – Highlights

West-East regional disparities in Slovakia

by Heba Omar, LIS

The phenomenon of regional disparities is prominent and has been well-captured across different Central and Eastern European regions, and Slovakia is no exception to that. Römisch (2003) argued that Prague cannot be considered a representative in terms of economic growth, infrastructure and employment rates for the rest of the Czech Republic regions “…it is not wise to take the old town of Prague as pars pro toto for the rest of the city or even the country…”, and from the literature, we can certainly deduce that West Slovakia is booming while the East is still lagging behind (Uramová and Kožiak 2008). This article will shed light on the evolution of West-East regional disparities in Slovakia during the period 2004 – 2013 using the LIS Database.

Slovakia is divided into four main regions, namely (from the West to the East); Bratislava (capital city), Západné Slovensko (Western Slovakia), Stredné Slovensko (Central Slovakia), and Východné Slovensko (Eastern Slovakia). The West-East regional disparities are captured in many forms, such as GDP per capita, employment, and poverty indicators (OECD, 2013). Causes of such disparities can be summarised as follows (Demmou et al. 2015; Römisch 2003):

  1. Low job creation in the Eastern and Central regions of the country, and insufficient labour mobility to the West.
  2. The regions are not equally equipped with growth factors, and by time these factors are used differently (both in terms of amount and intensity).
  3. Decreases in the production and employment of heavy industries (coal, mining, chemistry and others).
  4. Changes in the market dynamics after the fall of the iron curtain revealed that some regions were in poor competitive shape.

This article further investigates the role of employment as an underlying stimulus of regional disparity in Slovakia. In the following, three variables of the LIS Database are used to provide further exploration of the phenomenon1:

  • Employed (emp): Indicator of any employment activity in the current period.
  • Disposable Household Income (dhi): Total monetary and non-monetary current income net of income taxes and social security contributions (annual).
  • Labour Household Income (hil): Monetary payments and value of non-monetary goods and services received from dependent employment, as well as Profits/losses and value of goods for own consumption from self-employment (annual).

The figure below shows the evolution of regional disparities in terms of employment, disposable household income, and labour household income in the period of 2004-2013, between the developed capital Bratislava in the West and the least developed region Východné Slovensko (Eastern Slovakia). The figure displays the disparities as percentage differences; the regional employment disparity is measured as the difference in the percentage of employed in Bratislava and Eastern Slovakia.

Employment disparity at time x = % of employed in Bratislava – % of employed in Eastern Slovakia

The income disparity (for both dhi and hil) is measured as the percentage of income increase in the Bratislava region, with reference to the Eastern region.

dhi disparity at time x = (dhi in Bratislava – dhi in Eastern Slovakia) / (dhi in Eastern Slovakia) %
hil disparity at time x = (hil in Bratislava – hil in Eastern Slovakia) / (hil in Eastern Slovakia) %

Three main trends are observed. First, the disparity in the percentage of employed in the West compared to the East is persistent; with an increase of 1.8% over the study period, as it has risen from 10.8% in 2004 to 12.6 % in 2013 that is in accordance with the literature.

Regarding income disparity, there is an overall decrease in the income disparity during the period 2004 till 2013. In 2004, disposable household income was 26% higher in Bratislava as compared to Eastern Slovakia. This percentage declined to 20% by 2013. With respect to labour household income, the disparity percentage declined from 48% in 2004 to 33% in 2013.

An interesting finding from the presented figure is the trend of what is called “inter-income gap”; which is the difference between disparity in hil and disparity in dhi. In 2004, hil disparity was 48%, though the dhi disparity was only 26%, indicating that the inter-income gap was 22%. This gap represents strong evidence that the regional disparity in Slovakia is highly attributed to the low employment creation and returns in the East compared to the West. Monitoring the inter-income gap over the study period shows the deterioration of hil disparity, as the gap shrank to 13% in 2013.

These findings suggest that achieving employment convergence between the developed West and the less developed East is an inevitable means to attain higher equality and less regional disparity in Slovakia. To conclude, serious measures have already been taken in order to reduce the West-East disparities. Slovakia has been offered help and support from the European Union to decrease the regional differences. The Cohesion Policies (2007–13)2 focus mainly on the areas infrastructure, human resources, industry, services and agriculture, and rural development. The outcomes of the projects encompassed in the framework of the cohesion policy, are foreseen to have tangible impact on eliminating the gap between the advanced West and the less developed East. To fasten the development of the less developed regions, it is also necessary to devise a Regional Policy that takes into consideration other factors, such as cultural, social, historical, demographical, and the limited possibilities of each region.

1 More information on the definitions and the universe of LIS variables can be found on METadata Information System (METIS).

2 European Cohesion Policy is at the centre of the effort to improve the competitive position of the Union as a whole, and its weakest regions in particular

References
Banerjee, B., & Jarmuzek, M. (2009). Anatomy of regional disparities in the Slovak Republic.
Demmou, L., Halus, M., Machlica, G., & Menkyna, F. (2015). Spurring growth in lagging regions in Slovak Republic. OECD Economic Department Working Papers.
OECD (2013), OECD Regions at a Glance 2013, OECD Publishing, Paris.
Römisch, R. (2003). Regional disparities within accession countries. In Tumpel-Gugerell, G., & Mooslechner, P. (Eds.), Economic convergence and divergence in Europe: growth and regional development in an enlarged European Union. Edward Elgar Publishing.
Uramová, M., & Koziak, R. (2008). Regional disparities in Slovakia from the aspect of average nominal wage. E+ M Ekonomie a management.