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Public policies, regional inequalities and growth

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  • Martin, Philippe

Abstract

This paper constructs a two-region endogenous growth model, where economic geography and public infrastructures play a key role. The model allows us to analyse the contribution of different types of redistributive public policies on growth, industrial geography and spatial income distribution. An improvement of infrastructures that helps decrease transaction costs inside the richest region increases spatial concentration of industries, increases the growth rate, and decreases the gap in income between the two regions. An improvement in infrastructure in the poor region has the exact reverse effect. In this sense, the paper highlights a non-trivial political trade-off between growth and spatial distribution of economic activities. Contrary to transfers and traditional regional policies, it is shown that a public policy that reduces the cost of innovation can attain the objectives of higher growth and more even spatial distribution of incomes and economic activities. From that point of view, these policies seem preferable to the regional policies that are now implemented in Europe.
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  • Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
  • Handle: RePEc:eee:pubeco:v:73:y:1999:i:1:p:85-105
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    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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