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Growth Effects of Spatial Redistribution Policies

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Author Info
Calin Arcalean () (Indiana University)
Gerhard Glomm () (Indiana University)
Ioana Schiopu () (Indiana University)

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Abstract

We develop a two-region, two sector model with migration and public investment in infrastructure and education. In a numerical example calibrated to Portugal, we find that the structural funds can improve the growth rate of the lagging region and slightly reduce the regional inequality, without necessarily producing convergence. When the mix of national public investment departs from optimum, the allocation of supra-national funds across infrastructure and public education can partially offset this national sub-optimality. We also find that the short-run growth-maximizing mix is different from the long-run mix. Moreover, the rich region has an incentive to bias the allocation of structural funds towards human capital formation.

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Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2007-002.

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Length: 39 pages
Date of creation: Jan 2007
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Handle: RePEc:inu:caeprp:2007002

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Related research
Keywords: endogenous growth; spatial redistribution; regional policy; European Union;

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Find related papers by JEL classification:
H7 - Public Economics - - State and Local Government; Intergovernmental Relations
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
R58 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Regional Development Policy

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  1. Jaime Alonso-Carrera & Maria Jesus Freire-Seren & Baltasar Manzano, 2008. "Macroeconomic Effects From The Regional Allocation Of Public Capital Formation," CAMA Working Papers 2008-09, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
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