GDP Density Disparities in Old Europe: Theil Decomposition in Cross-Country Historical Perspective

Abstract

The political, social and economic aspects of Old Europe have experienced profound changes over the last century. The levels and variations of GDP provide a good, though partial, representation of these changes with specific reference to the economic development. According to historical data, GDP shows strong increases in Europe; among these countries also Italy. But, what can we say about the cross-country income inequality? In this paper, we analyze cross-country disparities of GDP density from 1870 to 2008 in fourteen western European countries. In particular, we use a Duro-Esteban decomposition of the Theil index to identify the separate contribution of GDP per capita and population density to the inequality; the correlation of these two components and the changes over time appear interesting also for the implications of the growth theory.