Macroeconomic Stability and Regional Inequality in European Countries: Evidence from Panel and Spatial Econometric Models (2000-2025)

This paper examines the relationship between macroeconomic stability, structural integration, and regional inequality across European countries comprising the EU-27 together with Norway, Switzerland, and Iceland over the period 2000–2024. Using a balanced panel of regional data, the analysis combines descriptive statistics with static and dynamic panel regressions, spatial econometric models, and marginal effects estimation to capture persistence, endogeneity, and spatial interdependence in regional inequality dynamics. The results reveal a high degree of persistence in regional inequality, indicating strong path dependence in territorial development. While average GDP growth and inflation levels do not exert a robust direct effect on regional disparities, macroeconomic volatility plays a central role. GDP growth volatility is found to reduce regional inequality, suggesting convergence effects during periods of aggregate instability, whereas inflation volatility significantly amplifies disparities, disproportionately affecting economically weaker regions. Structural factors—including trade openness, investment, and education spending—are consistently associated with higher regional inequality, reflecting the spatial concentration of economic activity and capital accumulation. Spatial econometric estimates provide strong evidence of regional spillovers and spatial clustering, indicating that inequality in one region is influenced by developments in neighboring regions and countries. These findings underscore the importance of accounting for spatial interactions and cross-border externalities when analyzing regional inequality in Europe. Overall, the paper highlights the need for coordinated macroeconomic stabilization and cohesion policies to mitigate persistent regional disparities and promote inclusive growth across an increasingly integrated European economic space. JEL Classification C23; C33; R11; R12; E32; F15