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Rational Underdevelopment

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Author Info
Ignacio Ortuño Ortín (Universidad de Alicante)
Klaus Desmet (Universidad Carlos III de Madrid)

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Abstract

We propose a two-region two-sector model of uneven development,where technological change benefits either the lagging or the leading region. Inthis framework inter-regional transfers may lead to persistentunderdevelopment; by raising wages, transfers reduce the chance of thebackward region adopting a new technology and taking o.. Due to uncertaintyabout which region benefits from technological change, the backward regionmay rationally choose to remain underdeveloped, while the advanced regioncontinues to pay transfers. The model provides a rationale for cases, such asItaly’s Mezzogiorno, where the same rich region subsidizes the same poorregion on a continuous basis.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2006-12.

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Length: 30 pages
Date of creation: Jun 2006
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2006-12

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Keywords: inter-regional transfers; regional policy; uneven development.;

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Find related papers by JEL classification:
R58 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Regional Development Policy
H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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References listed on IDEAS
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.:
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  2. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1057-90, November.
    Other versions:
  3. Klaus Desmet, 2002. "A Simple Dynamic Model of Uneven Development and Overtaking," Economic Journal, Royal Economic Society, vol. 112(482), pages 894-918, October. [Downloadable!] (restricted)
  4. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-46, May. [Downloadable!] (restricted)
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  6. Alberto Alesina & Stephan Danninger & Massimo Rostagno, 1999. "Redistribution Through Public Employment: The Case of Italy," NBER Working Papers 7387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Boltho, Andrea & Carlin, Wendy & Scaramozzino, Pasquale, 1997. "Will East Germany Become a New Mezzogiorno?," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 241-264, June. [Downloadable!] (restricted)
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  8. Gerlinde Sinn & Hans-Werner Sinn, 1994. "Jumpstart: The Economic Unification of Germany," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691728.
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  11. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March. [Downloadable!] (restricted)
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  13. Brezis, Elise S & Krugman, Paul R & Tsiddon, Daniel, 1993. "Leapfrogging in International Competition: A Theory of Cycles in National Technological Leadership," American Economic Review, American Economic Association, vol. 83(5), pages 1211-19, December. [Downloadable!] (restricted)
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  15. Bayoumi, Tamim & Masson, Paul R., 1995. "Fiscal flows in the United States and Canada: Lessons for monetary union in Europe," European Economic Review, Elsevier, vol. 39(2), pages 253-274, February. [Downloadable!] (restricted)
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  16. Basile, Roberto & Padoa Schioppa, Fiorella Kostoris, 2002. "Unemployment Dynamics of the 'Mezzogiornos of Europe': Lessons for the Mezzogiorno of Italy," CEPR Discussion Papers 3594, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  19. Brunello, Giorgio & Lupi, Claudio & Ordine, Patrizia, 2001. "Widening differences in Italian regional unemployment," Labour Economics, Elsevier, vol. 8(1), pages 103-129, January. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Ramon Tremosa-i-Balcells & Joan Costa-i-Font, . "The "relative competitiveness" patterns of Spanish regions after the European Monetary Union (1999-2002)," Studies on the Spanish Economy 169, FEDEA. [Downloadable!]
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