Regional Policy in a Multiregional Setting: When the Poorest are Hurt by Subsidies
AbstractRegional policies that seek to reduce economic inequalities between regions are common. These policies normally involve subsidies or transfers to the poorest regions. Over any given short-term horizon such subsidies serve to reduce inter-regional inequalities, but as they also affect migration patterns the long-term effects are less clear. This paper demonstrates using a three-region, general equilibrium model that subsidising the poorest region may be to the detriment of the periphery as a whole and even to the very region that receives the subsidy, if the subsidy draws firms away from a nearby region that would function better as a production centre. Though further research is needed to isolate the conditions under which such an effect would arise, the result has potentially important implications for the design of regional policy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2011:11.
Length: 42 pages
Date of creation: 28 Mar 2011
Date of revision:
Contact details of provider:
Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
More information through EDIRC
Regional policy; production externalities; agglomeration; multiregion model;
Other versions of this item:
- Nicholas Sheard, 2012. "Regional policy in a multiregional setting: when the poorest are hurt by subsidies," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(2), pages 403-423, June.
- H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-09 (All new papers)
- NEP-GEO-2011-04-09 (Economic Geography)
- NEP-URE-2011-04-09 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kiminori Matsuyama & Takaaki Takahashi, 1993.
"Self-Defeating Regional Concentration,"
1050, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kiminori Matsuyama & Takaaki Takahashi, 1993. "Self-Defeating Regional Concentration," Discussion Papers 1086, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kiminori Matsuyama & Takaaki Takahashi, 1993. "Self-Defeating Regional Concentration," NBER Working Papers 4484, National Bureau of Economic Research, Inc.
- Holl, Adelheid, 2004. "Manufacturing location and impacts of road transport infrastructure: empirical evidence from Spain," Regional Science and Urban Economics, Elsevier, vol. 34(3), pages 341-363, May.
- Martin, Philippe, 1999.
"Public policies, regional inequalities and growth,"
Journal of Public Economics,
Elsevier, vol. 73(1), pages 85-105, July.
- Pierre-Philippe Combes, 2010.
"The empirics of economic geography: How to draw policy implications?,"
- Pierre-Philippe Combes, 2011. "The empirics of economic geography: how to draw policy implications?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(3), pages 567-592, September.
- Richard E. Baldwin & Toshihiro Okubo, 2006.
"Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting,"
Journal of Economic Geography,
Oxford University Press, vol. 6(3), pages 323-346, June.
- Richard Baldwin & Toshihiro Okubo, 2005. "Heterogeneous Firms, Agglomeration and Economic Geography: Spatial Selection and Sorting," NBER Working Papers 11650, National Bureau of Economic Research, Inc.
- Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 21-49, February.
- Teixeira, Antonio Carlos, 2006. "Transport policies in light of the new economic geography: The Portuguese experience," Regional Science and Urban Economics, Elsevier, vol. 36(4), pages 450-466, July.
- Martin, Philippe & Rogers, Carol Ann, 1995.
"Industrial location and public infrastructure,"
Journal of International Economics,
Elsevier, vol. 39(3-4), pages 335-351, November.
- Ulltveit-Moe, Karen Helene, 2007.
"Regional policy design: An analysis of relocation, efficiency and equity,"
European Economic Review,
Elsevier, vol. 51(6), pages 1443-1467, August.
- Ulltveit-Moe, Karen-Helene, 2004. "Regional Policy Design: An Analysis of Relocation, Efficiency and Equity," CEPR Discussion Papers 4321, C.E.P.R. Discussion Papers.
- Vincent Dupont & Philippe Martin, 2006.
"Subsidies to poor regions and inequalities: some unpleasant arithmetic,"
Journal of Economic Geography,
Oxford University Press, vol. 6(2), pages 223-240, April.
- Dupont, Vincent & Martin, Philippe, 2003. "Subsidies to Poor Regions and Inequalities: Some Unpleasant Arithmetic," CEPR Discussion Papers 4107, C.E.P.R. Discussion Papers.
- Krugman, Paul, 1991.
"Increasing Returns and Economic Geography,"
Journal of Political Economy,
University of Chicago Press, vol. 99(3), pages 483-99, June.
- Faini, Riccardo, 1983. "Cumulative processes of de-industrialisation in an open region : The case of Southern Italy, 1951-1973," Journal of Development Economics, Elsevier, vol. 12(3), pages 277-301, June.
- Philippe Martin, 1999. "Are European regional policies delivering?," Sciences Po publications info:hdl:2441/9343, Sciences Po.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sten Nyberg).
If references are entirely missing, you can add them using this form.