Multidimensional Analysis of Regional Inequality: The Case of Hungary

Hungary has been in a transition process since the fall of the Iron Curtain. This process has resulted in important developments in regional policy. The introduction of a western style policy system seems, however, not to have affected regional inequality to any noticeable extent as measured by income per captia. There are still large disparities between the richest counties and the remaining counties in terms of this indicator. However, single indicator approaches to regional inequality have been criticised. Therefore in this paper we adopt a multidimensional approach to analyse regional inequality. For the counties of Hungary the multidimensionality of inequality is taken into account by using a multiple of social and economic indicators that are combined into a composite index. Theil's second measure of multidimensional inequality and principal component analysis are used to construct the composite index. The results thus obtained are used to identify the least-favoured and the most-favoured regions. We find that there are substantial differences between the single indicator approach based on per capita income and the multidimensional approach. Moreover, we argue that the EU Phare Programmes for Hungary have helped the economic development in developed regions situated on the EU border but at the same time have stimulated disparities within Hungary.