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Personal redistribution and the regional allocation of public investment

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  • Caminal, Ramon

Abstract

Should the geographic allocation of public investment aim at reducing regional inequalities or should it exclusively be concerned with the maximization of aggregate output? In this Paper I study the potential role of public investment in reducing personal welfare inequality, in combination with distortionary taxation. The case for public investment as a significant redistribution device seems weak. If the tax code is constrained to be uniform across regions then it is optimal to distort the allocation of public investment in favour of the poor regions, but only to a limited extent. The reason is that poor individuals are relatively more sensitive to public transfers, which are maximized by allocating public investment efficiently. If the tax code can vary across regions then the result is ambiguous and it might even be the case that the optimal policy involves an allocation of public investment distorted in favour of the rich regions.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 34 (2004)
Issue (Month): 1 (January)
Pages: 55-69

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Handle: RePEc:eee:regeco:v:34:y:2004:i:1:p:55-69

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  1. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
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  6. Ramon Caminal, 2003. "Personal Redistribution and the Regional Allocation of Public Investment," Working Papers 5, Barcelona Graduate School of Economics.
  7. Takahashi, Takaaki, 1998. "On the optimal policy of infrastructure provision across regions," Regional Science and Urban Economics, Elsevier, vol. 28(2), pages 213-235, March.
  8. de la Fuente, Angel, 2002. "Is the Allocation of Public Capital Across the Spanish Regions too Redistributive?," CEPR Discussion Papers 3138, C.E.P.R. Discussion Papers.
  9. Lockwood, Ben, 1997. "Inter-Regional Insurance," Discussion Papers 9703, Exeter University, Department of Economics.
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  12. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 979-1009, October.
  13. Bolton, Patrick & Roland, Gérard, 1995. "The Break up of Nations: A Political Economy Analysis," CEPR Discussion Papers 1225, C.E.P.R. Discussion Papers.
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Cited by:
  1. Caminal, Ramon, 2004. "Personal redistribution and the regional allocation of public investment," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 55-69, January.
  2. Akiyoshi Furukawa, 2012. "Regional allocation of public investment with transfer policy and agglomeration," Economics Bulletin, AccessEcon, vol. 32(3), pages 1865-1872.
  3. Herranz-Loncan, Alfonso, 2007. "Infrastructure investment and Spanish economic growth, 1850-1935," Explorations in Economic History, Elsevier, vol. 44(3), pages 452-468, July.
  4. Angel de la Fuente, . "Infraestructuras y política regional," Studies on the Spanish Economy 122, FEDEA.
  5. Chetan Ghate & Gerhard Glomm & Jialu Liu, 2012. "Sectoral infrastructure investment in an unbalanced growing economy: The Case of India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 12-07, Indian Statistical Institute, New Delhi, India.
  6. Halkos, George & Tzeremes, Nickolaos, 2011. "Population density and regional welfare efficiency," MPRA Paper 30097, University Library of Munich, Germany.
  7. Wegener, Stefan & Kiryluk, E., 2008. "Regional aspects of decision-making support for rural development in Poland," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43845, European Association of Agricultural Economists.
  8. de la Fuente, Angel, 2002. "Is the Allocation of Public Capital Across the Spanish Regions too Redistributive?," CEPR Discussion Papers 3138, C.E.P.R. Discussion Papers.
  9. Jean-Paul Faguet & Mahvish Shami, 2008. "Fiscal policy and spatial inequality in Latin America and beyond," LSE Research Online Documents on Economics 27162, London School of Economics and Political Science, LSE Library.

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