Regional Development in an Age of Divergence: Convergence, Territorial Traps and the Geography of the Twin Transition

Abstract

Regional development has returned to the centre of economic policy after three decades in which national growth was assumed to lift all places. This article examines why convergence stalled in the advanced economies and why the gap between prosperous and lagging territories is widening in most of the world. It reports a comparative secondary analysis that synthesises the European Union's Ninth Cohesion Report, recent OECD regional and development assessments for Africa and Latin America, and four econometric evaluations of place-based policy in China. Four findings emerge. First, convergence is real but conditional: central and eastern European regions moved from forty-five per cent of the European Union average GDP per head in 1995 to nearly eighty per cent by 2023, while around a third of European regions have still not regained their 2008 level. Second, the green and digital transitions are territorially asymmetric, concentrating opportunity where absorptive capacity already exists. Third, place-based instruments work, but conditionally: the Chinese evidence shows positive effects on human capital and persistent first-mover advantages, alongside environmental and distributional costs. Fourth, the binding constraint outside the European Union is fiscal rather than technical - African infrastructure investment would need to rise from roughly eighty-three to one hundred and fifty-five billion United States dollars annually to double continental GDP by 2040, at a time when governments spend seven times more on debt service than on infrastructure. The article proposes a six-fold typology of regional trajectories and argues that institutional capacity, not the volume of transfers, determines whether regional policy converges or merely compensates.