Income Inequality and the Economics of Cross-Border Cooperation: A Focus on Western Balkans Border Regions
Date Issued
2026-03-25
Abstract
This paper examines how cross-border cooperation influences income inequality in Western Balkan border regions, where inequality is exacerbated by structural transformations, uneven development, infrastructure deficits, and limited opportunities, alongside proximity to the EU that enables cooperation. Although CBC is increasingly viewed as a mechanism shaping economic and social outcomes, its distributive effects on income inequality remain understudied in the Western Balkan context. Addressing this gap, the study introduces a novel Cross-Border Cooperation Intensity Index (CBC-I) tailored to the Western Balkans and evaluates its association with income inequality using a regional panel dataset covering 2004-2024. The analysis is grounded in research on labour market integration, remittances, public service accessibility, and institutional spillovers. It uses annual panel data for border and non-border regions in Albania, North Macedonia, Serbia, Montenegro, and Bosnia and Herzegovina, harmonised where possible with Eurostat’s NUTS 2 structure. Income inequality is measured using the Gini coefficient, with controls including lagged CBC-I index, GDP per capita and trade openness. The results show that CBC-I has a negative and statistically significant coefficient of −0.162. This means that higher levels of cross-border cooperation are associated with lower regional inequality. In practical terms, a 10% increase in cross-border integration corresponds to roughly a 1.6-point decline in the Gini coefficient. GDP per capita also shows a negative relationship with inequality, while trade openness is not statistically significant. Overall, the results suggest that labour market integration across borders plays a meaningful role in reducing regional inequality.
The study offers empirical tools and policy-relevant insights for cohesion policy, EU enlargement, and regional development strategies.
The study offers empirical tools and policy-relevant insights for cohesion policy, EU enlargement, and regional development strategies.
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