The financial crisis of 2008 suddenly stopped the process of convergence of the poor regions of Spain with the richest that had accelerated since 1980. That economic shock, which impoverished the country and caused a wage devaluation, impact especially on the poorest communities, such as Extremadura, which stopped approaching the richest.
A report from the Bank of Spain reveals that it is productivity that explains the convergence and also the subsequent stagnation. In the decades of the 1980s, 1990s and early 2000s, poor communities gained productivity and managed to register greater GDP growth than communities considered rich, such as Catalonia or Madrid. And it was also the stagnation of productivity gains that paralyzed the improvement of the less developed.
“Until 2008, there was a decrease in economic differences between regions, so that the poorest grew more intensively. However, after the financial crisis this trend was paralyzed”, says the work of the Bank of Spain. The aforementioned study analyzes the role of other variables in slowing down convergence. There are two that act in the opposite direction. The labor market has contributed “very little” to the stoppage of convergence. On the other hand, demography has indeed favored convergence, because in recent years “the wealthiest regions have aged more quickly”. Many of these elderly people are migrants from poor regions who have retired to rich ones. Because there is an older population, they contribute less to GDP because fewer people are working.
The third graph on this page shows the evolution of the dispersion between the GDP (gross domestic product) of the communities over the last 40 years calculated by the Bank of Spain. Dispersion is reduced from 0.25 in the 1980s to 0.19 before the crisis. This indicator is now close to 0.20, which means that communities are distributed between 20% above and 20% below the average. The lower this indicator is, the more convergence there is between regions.
Other studies show that the mentioned process of rapprochement between rich and poor territories in economic terms is usually very slow and, in any case, it is very difficult to change the order of the communities from the richest to the poorest. The differences are reduced, but there are no changes in the ranking. For example, a recent Fedea report showed that in 1955 in Extremadura wages were on average the lowest, and in Madrid, the highest. Almost 70 years later this difference remains. This work also shows that Madrid has managed to position itself as the driving force of the Spanish economy in recent years. It has the highest GDP, surpassing Catalonia, which had occupied this position almost continuously until 2017.
However, if we look at the data on the generation of activity (GDP) per person, but taking into account purchasing parity (discounting the effect that in a region the prices of goods and services are more expensive or cheaper), the Basque Country is the richest Spanish community. These are data from a report drawn up by UPF professor Guillem López i Casasnovas and Professor Roger.
López and Casasnovas points out that the Basques are in first place due to the combination of three factors. The first, because Euskadi is a community with a smaller immigrant population. The second, because the disposable income of families is higher once the effect of the State has been incorporated when the taxes paid have been discounted and the public aid or subsidies received have been added up. The third is the cost of living. 100 euros buys more products and services in the Basque Country than in Madrid or Catalonia.
Following this analysis and as seen in the graph, after the Basque Country is Catalonia, slightly above the Community of Madrid.