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Which structural reforms affect the speed the regional convergence within a country? We found that domestic financial development, trade/current account openness, better institutional infrastructure, and selected labor market reforms facilitate regional convergence. However, these reforms have mixed effects on the growth of regions closer to the country’s development frontier. We also document that regional income disparity and average income are inversely correlated across countries so that speeding up regional convergence increases national income. We also present a theoretical model to discuss these results.

Structural adjustment (Economic policy) --- Convergence (Economics) --- Economic development --- Economic convergence --- Economics --- Economic policy --- Econometric models. --- Labor --- Macroeconomics --- Taxation --- Production and Operations Management --- Institutions and the Macroeconomy --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Wages, Compensation, and Labor Costs: Public Policy --- Macroeconomics: Production --- Taxation, Subsidies, and Revenue: General --- Macroeconomic Analyses of Economic Development --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Housing --- Infrastructure --- Technological Change: Choices and Consequences --- Diffusion Processes --- Industrial Policy --- Mobility, Unemployment, and Vacancies: Public Policy --- Welfare & benefit systems --- Labour --- income economics --- Public finance & taxation --- Structural reforms --- Labor taxes --- Minimum wages --- Productivity --- Tax wedge --- Macrostructural analysis --- Taxes --- Production --- Tax policy --- Income tax --- Minimum wage --- Industrial productivity --- Tax administration and procedure --- United States