Economic crisis and regional development in Greece

Abstract

This paper sets out to examine the determinants of regional develop-ment in Greece before and during the economic crisis. By proposing an econo-metric model with spatial effects for the years 2005-2008 and 2009-2011, which represent the sub-periods of growth and decline of the Greek economy respec-tively, we make it possible to capture the different factors that affect the region-al economic development of the NUTS III regions in the country. Results high-light that the most urbanized and high income level regions are more affected by the economic crisis. However, these regions had been the ones that most benefited during the upturn of the economic activity. The same applies to the regions that are based on agriculture, which had benefited during the period of economic development but cannot sustain the gains of development during the recession. Specialization in manufacturing is an important determinant of re-gional development, either in times of growth or in times of crisis, while tourism generates benefits to the neighbouring regions in times of economic crisis. These results are also tested for geographical subsets of the country such as the North-South divide and regions belonging to the development axis of the coun-try (PATHE) versus the rest regions of the country