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(Accepted 17 March 2001)
ABSTRACT. 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.
KEY WORDS: cluster analysis, Hungary, multidimensional regional inequality, principal component analysis, Theil's second measure of inequality
INTRODUCTION
Like many other Central and Eastern European (CEE) countries in Hungary, the transition process that occurred after the fall of the Iron Curtain in 1989 has implied important institutional and structural changes in civil society, the political framework and the economic system. Constitutional reform has laid the basis for the rule of law, respect for human rights and the protection of minorities. The establishment of a functioning market economy has led to sustained macroeconomic stability, structural reforms in the pension system and progress towards the achievement of privatisation. Growth of GDP has slightly increased from an estimated rate of 4.4% in 1997 to 4.5% in 1998. There has been a noticeable decline in the current account deficit from 3.8% of GDP in 1997 to 3% in 1998. The average rate of inflation has declined from 18% in 1997 to 13.5% in 1998. Based on the recent economic...