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New Economic Geography, Empirics, and Regional Policy

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Author Info
Joeri Gorter ()
Albert Van der Horst ()

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Abstract

There are doubts about the effectiveness of regional policy. Well known are the vain attempts of Italy to bridge the gap between the Mezzogiorno and the North, of Germany to bridge the gap between the Neue Länder and the West, and of the European Commission to reduce regional disparities in general. We validate a salient explanation for the lack of effectiveness: agglomeration advantages lock business activity in relatively prosperous core regions, even though wages and production costs tend to be higher there. On the basis of the `New Economic Geography' - a set of general equilibrium models that focus on location choice - in combination with descriptive statistics and econometric analysis, we conclude that the European economic geography is characterized by a network of local and stable core-periphery systems. Since regional policy tend to be insufficient to counter centripetal market forces, disparities between cores and their peripheries at a subprovincial level of regional aggregation are with us to stay. Moreover, if regional policy does have an impact, it may be adverse as some policies targeted on peripheral regions trigger location choices in favour of core regions.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p236.

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Date of creation: Aug 2005
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Handle: RePEc:wiw:wiwrsa:ersa05p236

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  30. Diego Puga, 2002. "European regional policies in light of recent location theories," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 373-406, October.
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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. Li, Yao, 2008. "Industrial Agglomeration and Wage Inequality in China," MPRA Paper 11426, University Library of Munich, Germany, revised Oct 2008. [Downloadable!]
  2. George Gelauff & Herman Stolwijk & Paul Veenendaal, 2005. "Europe's financial perspectives in perspective," CPB Documents 101, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  3. Stel, A.J. van & Suddle, K., 2005. "The Impact of New Firm Formation on Regional Development in the Netherlands," Research Paper ERS-2005-075-ORG Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
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  4. Candau, Fabien, 2006. "The Spatial and Public Economics of Regions, a Theoretical and Empirical Survey," MPRA Paper 1153, University Library of Munich, Germany. [Downloadable!]
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