Regional Asymmetries and Local Finances: A Cluster Analysis

Abstract

The economic, population and social dimensions of the Portuguese regions are analysed, because demographic issues, inequalities and social cohesion are seen as important strategic challenges for the Portuguese economy. Some indicators of local public finances and electoral participation are also studied to assess the possible impact of intermunicipal entities on socio-economic cohesion. Using cluster analysis and a set of eleven variables, regarding two years of analysis, 2009 and 2019, we identify four groups of territorial units (NUTS III) that have distinct economic, population and social characteristics. The results suggest three important conclusions. First, the poorest and most aging regions are the most dependent on government transfer payments per capita. EU funds do not positively discriminate the regions included in the poorest clusters. The poorest regions lack the financial resources needed to implement higher levels of current and capital expenditure per capita. Thus, intermunicipal entities should contribute to the formation of cluster of local authorities that promote economic efficiency and equity, namely through the joint management of social public services.