Sectoral Structure and GDP: is there a Remarkable Relationship in the Case of the Estonian Counties

Abstract

The paper aims to offer some empirical insights into regional disparities in sectoral structure and GDP per capita in the case of the Estonian counties. In order to elaborate on the aggregated indicators of the Estonian counties’ sectoral structure and to explore the relations between sectoral structure and GDP per capita as a proxy of economic wealth, the method of principal component in combination with regression analysis is applied. The results of empirical analysis confirm the validity of the hypothesis that regional disparities in GDP per capita are remarkably affected by the sectoral structure of the counties’ economy. Additionally to sectoral structure, the location of a county, measured by the distance between the capital city and counties’ centre, has a significant impact on GDP per capita. There is a coreperiphery structure with high income levels in the capital region (Harjumaa) and low income levels in peripheral regions. The divergence in regional GDP levels may indicate the concentration of production inputs and development of sectoral structure in regions, where economies are functioning more efficiently